The Department for Work and Pensions (DWP) has confirmed that the earnings thresholds for auto enrolment will remain frozen at present levels for 2023/24.
In a written statement, Pensions Minister Laura Trott stated that the decision had been made in the interests of ensuring the ‘continued stability of the policy’ against a challenging economic backdrop.
The approach for 2023/24 is about towing the line between affordability and enabling individuals to save into pensions where it makes good financial sense to do so.
The 2023-24 thresholds, which will apply from 6 April, are as follows:
- Auto enrolment earnings trigger = £10,000
- Lower Limit for qualifying earnings band = £6,240
- Upper Limit for qualifying earnings band = £50,270
What is Auto enrolment, and who is eligible to participate?
Auto enrolment was introduced in 2012, with the intention of improving retirement prospects for workers across the UK, and of generally building a more inclusive savings culture
Every UK employer is required to enrol eligible staff into a qualifying pension scheme, and to contribute to the pot in line with the legal minimum, which is currently 3 per cent of qualifying earnings, with a minimum employee contribution of 5 percent.
To be categorised as an eligible worker and therefore be automatically enrolled into a pension scheme legislation dictates that a worker must be:
- at least 22 years of age, but younger than state pension age;
- earning more than £10,000 per annum; and,
- normally working in the UK.
Although to join the 10.8 million already saving for retirement via auto enrolment an employee who doesn’t meet these criteria can choose to opt into a scheme and the employer has a legal responsibility to put them into a scheme.
Considerations as NMW set to increase
As we pointed out in a similar article last year, the lower limit for qualifying earnings is no longer aligned with the LEL for National Insurance Contributions (NICs) which is something worth taking into account when running calculations.
Furthermore, despite the fact that the latest freezing of thresholds is inspired by the cost of living crisis, it would be remiss to ignore the fact that some workers will be in receipt of a pay rise – whether to comply with the new National Minimum Wage rates, or otherwise.
These increases could bring more people into auto enrolment for the first time, and so some employers may be facing greater obligation and cost in respect of workplace pensions.
Assistance with auto enrolment obligations
Our specialist BACS-approved payroll bureau, in Bedfordshire, Hertfordshire and Cambridgeshire, GH Payscheme can assist you with administering your chosen workplace pension scheme and help you to ensure that you comply with all of the requirements of Automatic Enrolment and Re-Enrolment.