Freeze Auto Enrolment Thresholds Says TUC

8 February 2012 (PLANSPONSOREurope.com) – The TUC has called on UK government to freeze the lower thresholds in the auto-enrolment regime - keeping the bottom of the earnings band on which contributions have to be paid (£5,564) and the earnings level at which auto-enrolment is triggered (£7,475) - at current levels.

The government is set to include a new earnings trigger for auto-enrolment, set to be introduced later this year, which recommends workers should only be auto-enrolled once their earnings rise above the income tax threshold (£7,475). They would still pay contributions from the bottom of the earnings band.

However, the TUC claims that women would be the main losers from the new earnings trigger as most workers with pay between the lower limit of the earnings band and the income tax threshold are women working part-time. The TUC therefore argues that auto-enrolment trigger should be frozen.

The TUC adds that linking auto-enrolment with the income tax threshold is particularly damaging given the coalition plans to increase it to £10,000.

TUC General Secretary Brendan Barber said: “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.

“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.”
 

PLANSPONSOREurope Staff
editors@plansponsoreurope.com