The Department for Work and Pensions (DWP) is consulting on the earnings thresholds for auto-enrolment for the 2015/16 tax year. Views are sought on the factors it should take into account when revising the earnings trigger and qualifying earnings band.
Regarding the earnings trigger, a key question is whether it is inappropriate to continue the alignment of the trigger level with the income tax threshold, considering that the tax threshold is due to rise more quickly than had been anticipated although earnings growth has been lower than expected. The alignment might exclude people who would otherwise benefit from pension saving. The DWP is considering four options, examined in the consultation paper:
- freezing the earnings trigger at its current level of £10,000;
- raising the trigger by indexation (CPI or growth in earnings), up to about £10,183;
- increasing the trigger to £10,500 in line with the income tax threshold; and
- using the Pension Commission's benchmark replacement rate to set the trigger, at about £9,876.
As to the qualifying earnings band, the DWP proposes to follow broadly the same approach as in previous years, where the lower and upper ends of the band are set in line with the National Insurance lower and upper earning limits respectively. Views are sought on whether such alignment has caused issues in practice and whether other factors should be taken into account.
The consultation runs until 25 November 2014. The DWP will issue its response in December around the time of the Autumn Statement and the final thresholds are expected to come into effect on 6 April 2015.
View the consultation paper.