The Government’s decision to freeze the auto-enrolment earnings trigger at £10,000 may not go far enough to bring more people into retirement saving, pension experts say.
The Government announced earlier this week it would maintain the salary threshold at which employees are automatically enrolled, though it will increase the lower earnings band on which contributions are assessed from £5,824 to £5,876 and the upper earnings band from £43,000 to £45,000. It estimates an additional £71m will flow into pension savings as a result of the change.
But pensions experts say that more workers, including those with multiple part-time or low-paid jobs, will need to be auto-enrolled to achieve a healthy level of pension saving.
Scottish Widows director of employer relationships Jackie Leiper says: “Automatic-enrolment has undoubtedly been a success in getting almost seven million people enrolled into a company pension scheme. But the decision of the Department for Work and Pensions to freeze the trigger at £10,000 for the next tax year will mean the continued exclusion of many part-time and low-paid workers from this valuable benefit.”
Aegon head of pensions Kate Smith says: “Freezing the annual salary threshold at £10,000 for another year should bring more people into pension saving, but with salaries flatlining, we may need to consider going further.”
Smith suggests one way to increase contributions would be to move gradually to a position where contributions apply on all earnings.
Confirmation that next year’s review of auto-enrolment will include how to cater for the self-employed was widely welcomed by the market.
The People’s Pension director of policy and market engagement Darren Philp says: “The review is a chance to iron out some of the wrinkles with the current policy and make sure it continues to be a success. It is a chance to take stock and consider the evidence, and to deal with issues such as excluded groups (including the self-employed), burdens on schemes and employers, and whether the various thresholds continue to be appropriate.
“This is an opportunity to improve an already successful policy and make sure it is fit for purpose as we move into the next decade.”