The government has confirmed the auto-enrolment earnings trigger and qualifying earnings bands for 2019/20, following its annual review.
The auto-enrolment earnings trigger determines who is eligible to be automatically enrolled into a workplace pension by their employer in terms of how much they earn. The qualifying earnings band is in place in respect of which contributions are made – the band is defined by the lower earnings limit and the upper earnings limit. These are set in legislation and reviewed annually.
The Secretary of State has considered the latest analytical evidence and the policy objectives and has concluded that the existing earnings threshold of £10,000 remains the correct level and will not change for 2019/20.
“This represents a real terms decrease in the value of the trigger when combined with assumed wage growth and will bring in an additional 40,000 individuals into the target population,” stated the report. “The decision reflects the key balance that needs to be struck between affordability for employers and individuals, and the policy objective of giving those who are most able to save the opportunity to accrue a meaningful level of savings with which to enter their retirement.”
The report confirms that, for the lower qualifying earnings limit, the link with the National Insurance Contributions (NICs) Lower Earnings Limit will be maintained at its 2019/20 value of £6,136. Therefore, this will also be the value of the lower limit of the qualifying earnings band for 2019/20.
There have been calls to remove the lower qualifying earnings limit altogether, something that the report confirms is the government’s ambition in the future. However, it does not plan to implement this change until the mid-2020s, subject to discussions with stakeholders.
Finally, the upper limit of the qualifying earnings band, which caps mandatory employer contributions, will be set at that the NICs Upper Earnings Limit at its 2019/20 value of £50,000.
“Retaining the link between NICs levels and the qualifying earnings band limits, provides an important element of consistency for employers, the pensions industry and payroll services,” concludes the report.
