Head of Pensions at Aegon, Kate Smith comments: For the first time the DWP has frozen the Qualifying Earnings Bands triggers which means that after last year’s technical ‘no change’, for the second year running auto-enrolment contributions will be based on a band of earnings between £6,240 and £50,270 a year. Effectively this means that both employees and employers contributions will rise slightly as wages increase.
“Additionally the earnings trigger has been fixed at £10,000 for another year, meaning that it has been the same for eight years since 2014/15. This will bring an additional 17,000 employees into workplace pension saving. Given the widespread cost of living concerns, we believe the freezing of the auto-enrolment thresholds provides the right balance between affordability and enabling more employees to benefit from employer contributions, as well as marginally increasing personal pension contributions. Wage increases should mean that employees will see little difference in take-home pay as a result of the slightly higher personal contributions.
“The hope is that by keeping the earnings trigger at £10,000 the Government will have breathing space to work on future improvements to auto-enrolment, including the introduction of the 2017 review of auto-enrolment recommendation. “
Andrew Tully, technical director at Canada Life comments: “Freezing the AE threshold at £10,000 still means more workers will be auto-enrolled as their earnings increase above £10,000. However, it fails to address the major issue which is the many people – mostly women – who earn below £10,000, or have multiple jobs each of which are below £10,000, who aren’t auto-enrolled. We know automatically enrolling people in a pension has been a huge success, now we need to extend that coverage to more people who are currently missing the opportunity to benefit from their employer’s pension contributions.”
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