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Freeze auto-enrolment thresholds, Government urged

Freeze auto-enrolment thresholds, Government urged

Category: Pensions

Updated: 08/02/2012
First Published: 08/02/2012

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

The Government has been urged not to increase the threshold at which workers are to be automatically enrolled onto company pension schemes.

The changes could affect almost two million women, the TUC is warning.

The Government could introduce a new earnings trigger for auto-enrolment, following their review, which recommended that workers should only be auto-enrolled once their earnings rose above the income tax threshold (£7,475).

The TUC says that the plan to link the threshold at which workers are enrolled onto pensions with the income tax threshold could be especially damaging given the coalition's plan to increase the point at which people pay tax to £10,000.

Analysis of official earnings data shows that the new earnings trigger could eventually stop around two million women from being auto-enrolled into pensions.

More than one in seven female workers (15.5% or 1.9 million) currently earn more than the current lower earnings band (£5,564) but under £10,000. One in three female part-time workers (1.7 million) earn between the current lower earnings band and £10,000.

Men are less likely to be affected by this change as just half a million men earn between the current lower earnings band and £10,000.

"Auto-enrolment is a huge advance. But no-one can pretend that contributions are good enough, particularly during the long wait before every company is covered by auto-enrolment and the two years after that before everyone gets their full contribution," said Brendan Barber, general secretary of the TUC.

"The Government should use its review of the thresholds to widen the earnings band each year by freezing the lower limit, while increasing the upper band limit in line with earnings.

"This would give a small manageable increase in the earnings band each year. It's the pensions equivalent of fiscal drag - raising more tax by freezing tax thresholds.

"In particular we urge the Government not to raise the auto-enrolment earnings trigger in line with the income tax threshold, which the coalition is keen to raise to £10,000.

"Whether this is the best way to help the low-paid is an interesting debate, but it would be disastrous if it had the unintended consequence of excluding a significant proportion of women workers from pensions saving."

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