On the go: The government has confirmed that auto-enrolment thresholds will be held at their current levels for the next year.
In a statement published on January 26, pensions minister Laura Trott said the decision was taken to “ensure the continued stability of the policy in light of the impact of Covid-19 and prevailing economic factors”.
The 2023-24 annual thresholds mean that the auto-enrolment earnings trigger will remain at £10,000 and the lower earnings limit of the qualifying earnings band will remain at £6,240, with the upper earnings band staying at £50,270.
Trott said: “We want to ensure that our approach continues to enable individuals, for whom it makes economic sense, to save towards their pensions while also ensuring affordability for employers and taxpayers.”
Speaking to Pensions Expert’s sister title FTAdviser on the back of the statement, AJ Bell head of retirement policy Tom Selby said that over the medium term, boosting pension contributions will need to become a priority for either this government or its successor.
However, he said given the pressure facing individuals and businesses, it is understandable that the government is equivocating over expanding auto-enrolment at this point in time.
“The reality is that millions of households are struggling to meet day-to-day living costs,” he said.
“There are signs that inflation will come down in the coming months, but the latest [consumer price index] figure remains in double digits and the Bank of England’s target of 2 per cent still feels a long way away.
“Auto-enrolment opt-outs haven’t spiked dramatically as a result of this yet, but research we carried out towards the end of last year showed a third of workers could quit their workplace pension in response to rising living costs. This is the sort of scenario ministers will be desperate to avoid.”
Hargreaves Lansdown senior pensions and retirement analyst Helen Morrissey noted that the statement will have come as “no surprise”.
“With budgets being squeezed like never before, people are making difficult financial decisions based on balancing saving for their future with meeting their day-to-day living costs,” she said.
“Any move to increase the amount going into a pension by actively reducing or removing earnings limits may be enough to tip people over the edge and opt out.
“However, it’s worth saying [that] freezing the trigger and lower earnings limits will see more people being brought into auto-enrolment if they get a pay increase.”
Trott’s statement comes alongside analysis published by the Pensions Regulator on the defined contribution market, which showed that aggregate asset values in occupational DC schemes are now worth £143bn.
This is an increase of £29bn or 26 per cent since last year, and 546 per cent since the beginning of 2012.
The data published by TPR also revealed that there are 26.3mn memberships in occupational DC schemes, up by 1,069 per cent since 2012.
Yet average assets per membership have fallen by 66 per cent since 2012. In January 2023, the figure stood at £5,700, compared with £17,200 in 2012.
This article first appeared on FTAdviser.com
