Auto-enrolment threshold to be aligned with tax

The government has announced that automatic pension enrolment rates are to be aligned with tax and national insurance thresholds, to streamline administration for businesses.

In October, the largest employers will be the first to start automatically enrolling employees into qualifying workplace pension schemes and making contributions to the schemes, to which employees who opt to stay in will also contribute. The roll-out programme will continue until 2018, by which time all new employers will be coming on stream automatically.

Announcing the measure on 26 March, Minister for Pensions Steve Webb said there had been an “overwhelming response” to the government’s consultation on the issue to align the automatic enrolment trigger with existing payroll thresholds.

He said: “This will help firms make a success of these reforms, as they will be able to better understand who is eligible to be enrolled.

“These changes strike the right balance between getting as many people into workplace pension saving as possible and ensuring that we do not enrol some people who would not financially benefit from saving.

“People who are excluded from automatic enrolment will still be able to opt themselves in, benefiting from a contribution from their employer.

Employers will therefore pay contributions on employees’ earnings between £5,564 and £42,475 at 2012-13 rates. A worker will be automatically enrolled into a workplace pension scheme if they earn more than £8,105 per year, the same threshold above which they pay income tax.

The rates will be reviewed by the government each tax year.

Link: Automatic enrolment guidance