DWP to freeze auto-enrolment threshold

Each year the Department for Work and Pensions (DWP) will review the earnings threshold for automatic enrolment, the Government’s all-new compulsory workplace pensions scheme.

However, its current projections for the tax year 2017/18 will freeze the earnings trigger for automatic enrolment at £10,000.

It means that any employee between the age of 22 and the state pension age earning more than £10,000 in each tax year must be automatically enrolled into a workplace pension scheme. These employees are called ‘eligible jobholders’.

The projected lower earnings limit will be £5,876. Employees between the age of 22 and the state pension age earning less than the earnings trigger but more than the lower earnings limit are called ‘non-eligible jobholders’.

Employers have no obligation to enrol non-eligible jobholders. However, they can choose to opt in. If they do, employers must make contributions to their pension fund.

Workers between the ages of 16 and 74 earning less than the lower earnings threshold are classified as ‘entitled workers’. An entitled worker is not automatically enrolled into a pension scheme but can choose to opt in. If they do, employers have no obligation to contribute towards their pension fund.

Employee age

Employee earnings 16 to 21 22 to state pension age State pension age to 74
Less than or equal to £5,876 Entitled worker Entitled worker Entitled worker
Over but no more than £10,000 Non-eligible jobholder Non-eligible jobholder Non-eligible jobholder
Over £10,0000 Non-eligible jobholder Eligible jobholder Non-eligible jobholder

Announcing the threshold, a DWP spokesperson said: “The Secretary of State has re-considered all the review factors against the latest analytical evidence and policy objectives, and decided that the current threshold of £10,000 remains the right level and therefore will not change for 2017/18.

“This strikes the right balance between administrative simplicity and consistency for the employers implementing automatic enrolment up to 2018, ensuring that the people brought into pensions saving are likely to benefit.

 “We want to ensure that the right people are brought into savings, and we also want to balance the costs and benefits between individuals and employers.”

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