Pensions setback for low earners

The TUC has condemned a government decision to raise the minimum earnings level for automatically enrolling workers into a pension scheme. From this April it will go up by a whopping 16.5% — to £9,440 from £8,105.

That will leave out an estimated 420,000 workers who would otherwise be enrolled and therefore eligible for the minimum employer contributions (1% of qualifying earnings rising to 3% from 2018).

The decision was described as “disastrous” by outgoing TUC general secretary Brendan Barber. “Excluding more and more people from auto-enrolment is undermining plans to improve people’s retirement income and tackle old-age poverty,” he said.

The announcement followed chancellor George Osborne’s Autumn Statement and a consultation exercise by the Department for Work and Pensions.

The rise is in line with the threshold for PAYE income tax, to make it simpler for employers and workers to understand. However, some unions challenged the need for an earnings-related trigger on the grounds that it excludes low earners and part timers, the majority of them women.

From the same date next April, the lower limit of the qualifying earnings band (which defines contributions to be paid), will rise.

It is going up from £5,564 to £5,668, so that it still aligns with the National Insurance Lower Earnings Limit, while the upper limit at £41,450 (lower than it currently is), will align with the National Insurance Upper Earnings Limit.