The Chartered Institute of Payroll Professionals ……………………………………………………………Policy News Journal
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Although the Secretary of State has some flexibility in the way the amounts for the earnings trigger and qualifying earnings band are set, section 14 of the Pensions Act 2008 sets out certain factors which the Secretary of State may take into account in reviewing these amounts. The Government can set out policy objectives and the principles that should inform the setting of the thresholds. It cannot pre-determine thresholds or the approach for future years.
The first two annual reviews established three principles to be used when reviewing the automatic enrolment thresholds. These principles were endorsed by stakeholders and we believe that they remain relevant:
(i) Will the right people be brought in to pension saving? In particular, at what level will the earnings trigger bring in as many people as possible who will benefit from saving? At what level does the trigger need to be set to avoid the automatic enrolment of those who are unlikely to benefit from saving? And what are the equality implications of the different options? (ii) What is the appropriate minimum level of saving for people who are automatically enrolled ? Everyone who is automatically enrolled should pay contributions on a meaningful portion of their income. To ensure this, we need to maintain an appropriate gap or de minimis between the lower limit of the qualifying earnings band and the earnings trigger. (iii) Are the costs and benefits to individuals and employers appropriately balanced? The cost implications of the thresholds remain relevant and we need to factor in the continuing importance of simplicity. Alignment as far as possible with recognisable tax and NICs thresholds simplifies system builds, provides compatibility with existing payroll systems and makes automatic enrolment as easy as possible to administer and explain.
Further information
Review of the automatic enrolment earnings trigger and qualifying earnings band for 2017/18: supporting analysis Ministerial statement on the automatic enrolment 2017 review and the thresholds review 2016 automatic enrolment research report
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Review of automatic enrolment to build on success 13 December 2016
The DWP has announced the scope of the automatic enrolment review which is to take place in 2017.
In a ministerial announcement Richard Harrington, Parliamentary Under Secretary of State for Pensions said that the main focus of the review will be to ensure that automatic enrolment continues to meet the needs of individual savers.
The existing coverage of the policy will be looked at and the needs of those not currently benefiting from automatic enrolment will be considered, for example employees with multiple jobs who do not meet the criteria for automatic enrolment in any of their jobs. Also under examination will be the automatic enrolment thresholds namely, the trigger and the qualifying earning bands required by legislation (Section 14 of the Pensions Act 2008) and the age criteria for automatic enrolment. The review will also be used to consider how the growing group of self-employed people can be helped to save for their retirement. The review will be an opportunity to consider whether the technical operation of the policy is working as intended. Consideration will be given to whether there may be any policies which disproportionately affect different categories of employers or could be further simplified. The review will also include the requirements set in legislation relating to the statutory review of the alternative quality requirements for defined benefits schemes (section 23A of the Pensions Act 2008) and for the certification requirements for money purchase schemes (section 28 of Pensions Act 2008). An examination of the level of the charge cap, which was intended to take place in 2017, will also be incorporated within this review and will assess whether the level of the cap should be changed and whether some or all transactions costs should be covered by the cap.
The Chartered Institute of Payroll Professionals
Policy News Journal
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