DWP freezes auto-enrolment earnings trigger at £10k

The government has confirmed it is freezing the minimum earnings level for automatic enrolment into a workplace pension scheme at £10,000 for 2022/23.

The move to maintain the earnings trigger at the same level is estimated to bring an extra 17,000 savers into the pension system, when compared to increasing the trigger in line with average wage growth.

As part of the announcement, the DWP also confirmed that the qualifying earnings band that minimum auto-enrolment contributions are based on has also been frozen for 2022/23. This means earnings between £6,240 and £50,270 will qualify for a matched employer contribution

The DWP describes the earnings trigger as one of the key factors which ultimately governs who gets enrolled into a workplace pension scheme through auto-enrolment.

Commenting on the decision to freeze it at its current level, Canada Life technical director, Andrew Tully, said: “Freezing the auto-enrolment 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.”

AJ Bell head of retirement policy, Tom Selby, added: “The decision to freeze the earnings level at which savers are automatically enrolled into a workplace pension scheme at £10,000 will result in thousands more people saving for retirement, many for the first time.

“Although this is good news, anyone with earnings above £10,000 but below £12,570 – the point at which basic-rate tax at 20% kicks in – who is auto-enrolled into a ‘net pay’ scheme risks missing out on valuable pension tax relief.

“A solution to this so-called ‘net pay problem’ has been devised but is not expected to be in place for a number of years. In the meantime, over one million people a year risk missing out on the tax relief they are due.”

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