The lower limit qualifying earnings band will remain at £5,824 and the earnings trigger will be frozen at £10,000 for 2016/17.
Under the proposed thresholds, the government estimates the overall level of pension saving to be £2,380 million in 2016/17, around £23 million higher than it would be if the thresholds remained at 2015/16 levels.
Around £12 million of this increase would be from higher employer contributions; around £9 million would be from higher individual contributions; and around £3 million would be from increased tax relief on individual contributions.
With an earnings trigger of £10,000, DWP figures show that around 10 million individuals are estimated to be in the eligible target population for automatic enrolment, of which around 38% are women.
Freezing the value of the automatic enrolment trigger at £10,000 in 2016/17 results in a real terms decrease in the trigger. This will bring an additional 130,000 individuals into the target population (of whom around 91,000 (71%) are women and an associated increase in pension saving of £6 million in 2016/17.
However TUC General Secretary, Frances O’Grady, argued:
“By freezing the earnings trigger for automatic enrolment, the government has missed the opportunity to bring millions of low paid and part-time workers into the pensions system.
“The government’s own figures show that women make up just 38 per cent of those eligible for auto-enrolment under its plans, leaving millions missing out on employer contributions to workplace schemes.
“We know from the success of automatic enrolment that relying on these groups to voluntarily opt-in to pension saving is a very ineffective way of reaching more workers. Without action, we risk leaving lower earners without the vital benefits provided by regular pension savings.”
Jackie Leiper, director of employer relationships at Scottish Widows, added:
“Although we welcome steps to improve workplace savings levels, we would like to see more reforms that maximise eligibility for low earners, many of whom are women.
“When the auto-enrolment threshold was increased to £10k, 170,000 fewer people qualified (120,000 of those are women). Our research shows 18% of women work part-time compared to 6% of men, and a threshold review as well as contributions based on full earning as opposed to band earnings would help prevent further reducing savings for lower earners and engage more of the workforce in preparing for retirement.”
