In October, I questioned whether the government’s proposal to link the automatic enrolment earnings trigger to the personal income tax allowance meant workplace pensions reform was being ‘scaled back’. The TUC opposed the proposal because it would lead to many thousands of low-earners being excluded from auto-enrolment. The Autumn Statement may just have made the situation even worse.
The earnings trigger is the level of earnings an employee must have before their employer is obliged to enrol them into a pensions scheme. Purely to make this system easier to administer for employers, the government wants to set the trigger at the same rate as the personal tax allowance. We had been expecting the allowance for 2013 to be £9,205. From 2011 data we know that more than 4 million people earn less than this amount, so would not qualify for auto-enrolment.
The TUC does not believe that linking the trigger and the personal allowance is justifiable, because the allowance is rising far more quickly than anticipated when the earnings trigger was first introduced, and eligibility for automatic enrolment is therefore being tightened simply as an unintended consequence of policy decisions in other areas.
It now appears that the allowance will be rising even more quickly. George Osborne informed us today that it will instead be £9,440 from April 2013. No reference was made the potential impact on the auto-enrolment trigger which, if the government sticks to its guns, will rise to the same level. A quick recalculation of the figures suggests that even this tiny change will mean around another 130,000 low-earners fall below the trigger so would not qualify for auto-enrolment.