Auto-Enrolment 2 – Consultation re Earnings Trigger and Earnings BandMonday, January 9th, 2012
These are two terms which require a brief recap:
- The Earnings Trigger is the level of earnings, at which, when reached by the employee, the employer is obliged to consider auto-enrolment into a qualifying pension scheme
- The Qualifying Earnings Band is the band of earnings on which the employee and employer will pay pension contributions once enrolled
The Earnings Trigger was set in the Pensions Act 2011 at £7,475, i.e. the annual Personal Allowance. The Qualifying Earnings Band was set in the Pensions Act 2008 as the earnings between £5,035 and £33,540, which were the Earnings Threshold and Upper Earnings Limits in 2006/07. The Pensions Act 2011 requires an annual review of both these figures to ensure that they are relevant and up-to-date. They will be set by Statutory Order each year.
The overriding obligation is to ensure that automatic enrolment continues to target the lower and middle earners whilst, at the same time, recognising the costs to businesses.
The consultation is open until 26 January 2012.
The figures set in previous Acts will clearly be outdated for the first year of auto-enrolment in 2012/13. Further, the Act of 2011 requires a review. However, the power to review the thresholds is left wide to ensure that they can be amended in line with changing economic, social and political climates.
The Trigger and Earnings Band have been set previously to reflect the tax allowance and NIC earnings thresholds with which we are already familiar. Whilst there are no rules for the review to tie them to these thresholds, surely it would be sensible for them to remain this way. Otherwise, there are another set of figures that we have to become accustomed to as part of our daily payroll lives.