DWP urged to raise auto-enrol earnings ceiling

27 January 2012 12:18 pm | By Tom Selby

Hargreaves Lansdown is urging the Government to bring the upper earnings threshold for minimum automatic enrolment pension contributions into line with national insurance.

When auto-enrolment begins in October 2012, employees and employers will have to make pension contributions based on an upper and lower earnings limit.

The Department for Work and Pensions has proposed setting the earnings trigger above which employees must be auto-enrolled into a workplace pension scheme at £8,105, in line with the personal tax allowance threshold for 2012/13.

However, the planned earnings ceiling for calculating minimum pension contributions is £39,853 - more than £2,000 less than the upper earnings limit for national insurance.

Hargreaves Lansdown head of pensions research Tom McPhail (pictured) says: “The rules and thresholds should be kept as simple as possible. The proposed earnings trigger of £8,105 and the minimum threshold of £5,564 both tie in with established tax and NI thresholds.

“We recommend that the DWP adopts a similar policy in relation to the upper earnings threshold and aligns this with the upper earnings limit for national insurance.

“This would put the upper ceiling at £42,475 for the 2012/13 tax year. We know that the 8 per cent minimum contributions will be inadequate to a buy most people a decent pension, for this reason we believe the government should be looking for ways to increase contributions, rather than artificially reducing them.”

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