Govt to raise auto-enrol upper limit and freeze £10k trigger

Iain_Duncan_Smith

A move to raise the upper limit of the automatic enrolment savings band will boost pension savings by £23m.

In analysis published today the Department for Work and Pensions says moving the upper limit of the qualifying earnings band to £43,000 in 2016/17 means pension savings will be £2.4bn, £23m higher than if the thresholds had remained at the 2015/16 level.

Higher employer contributions account for £12m, individuals will contribute £9m more while £3m will come in extra tax relief.

The lower limit of qualifying earnings will remain at £5,824.

The DWP proposed to move the thresholds in line with the National Insurance Contributions upper and lower earnings limit.

The auto-enrolment trigger will remain at £10,000, meaning people earning below that figure will not receive contributions.

In addition, the Government restated a warning that around 180,000 workers earning between £10,000 and £11,000 will miss out on 20 per cent tax relief if their scheme uses the ‘net pay’ model.

However, it says it will not take any action until the outcome of the Treasury’s consultation on tax relief is known.

It says: “Small and micro employers should ask their provider about the tax implications before making a decision on the scheme they choose. The Pensions Regulator has published information online for employers on how to obtain tax relief and the implications for staff depending on the method used.

“However, the Government is committed to keeping the matter under close review particularly in the light of the outcome of HM Treasury’s recent consultation on pensions tax relief.

“Automatic enrolment is now entering a crucial stage in the roll out of this major reform and it is not considered to be the right time to make significant changes to the existing framework.”