In a bid to increase the country’s pensions savings, the government is set to freeze the auto-enrolment trigger at £10,000 for the 2017-18 tax year, meaning that any individual earning this amount or over must be automatically enrolled into their workplace pension scheme.
As well as freezing the trigger, the Department for Work and Pensions (DWP) has confirmed that the lower level for band earnings, used for calculating minimum auto-enrolment contributions, will be increased from £5,824 to £5,876, and the upper level of the band earnings increased from £43,000 to £45,000.
The DWP has said that proposed changes will result in significantly higher levels of savings into pension schemes. In its published review document, they have said it is estimated that these combined changes are likely to produce a £71m boost in pension savings:
- £30m increase in employer contributions
- £31m increase in individual contributions
- £10m increase in tax relief to be offered on individual contributions
Peter Smith, Corporate Benefits Director at Benefex, says: “The trigger has been at £10,000 since it was last increased back in 2015. The freeze at £10,000 sees it fall further out of line with the tax-free earnings limit (personal allowance), which will be £11,500 from April 2017. This means that it is more important than ever that employers use pension schemes that can allow employees to obtain tax relief at source.”
The DWP are planning to further review the current pension rules to consider how it can also help the self-employed, and those working multiple jobs which, individually, do not trigger automatic enrolment. Currently, only one in seven self-employed people are saving towards a pension, and twice as many women as men work two jobs but do not qualify for auto enrolment.
If you have any queries regarding the changes to auto enrolment, you can call us on 0844 963 0023 or drop us an email on email@example.com, and one of our team will be happy to assist.