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DWP cuts 420,000 from auto-enrolment with trigger changes

by William Robins on Dec 13, 2012 at 13:52

DWP cuts 420,000 from auto-enrolment with trigger changes

The earnings trigger for auto-enrolment has been raised to £9,440, excluding 420,000 individuals from auto-enrolment.

Following a consultation the Department for Work and Pensions (DWP) has raised the value of the automatic enrolment trigger from £8,105 to £9,440 for the year 2013-14.

It has been done to keep the earnings trigger in line with the personal allowance.

The lower limit of the qualifying earnings band is £5,668 and £41,450 will be the upper limit of the qualifying earnings band.

The DWP said the measure would exclude around 420,000 individuals, of whom 76% are women.

Tom McPhail, Hargreaves Lansdown head of pensions research, criticised the move. He said the change to the trigger adds to other rises since 2006 when the trigger was set at £5,035, meaning that around one million people originally intended to be auto-enrolled now will not be.

‘Many employers will welcome this news. It will reduce their overall pensions bill, it keeps their administration simple and it takes more of their lower paid employees out of the system. Unfortunately it will mean that hundreds of thousands more workers will miss out on the opportunity to build a good retirement pot and because most of them are women it will exacerbate inequalities in the pension system.’

4 comments so far. Why not have your say?

Scott Gallacher

Dec 13, 2012 at 14:32

No doubt someone can enlighten me but how does the exclusion of lower paid or part time workers from Auto-Enrolment not fall foul of UK/EU rules on indirect sexual discrimination?

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Dec 13, 2012 at 14:36

Because they aren't stopping them from joining, just that they won't be automatically enrolled. They should still have the right to request to join the scheme once it's setup provided they are willing to meet the contributions required.

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Keith Cobby

Dec 13, 2012 at 15:47

If they do not pay income tax will they still be entitled to tax relief?

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Eamonn Dorling

Dec 13, 2012 at 15:53

DS is correct. The ruling happens to affect more women than men - it might also affect more people driving red cars compared to blue. The point that does not seem to be of concern is the very low level of contribution for someone earning say £115 per week, deduct the qualifying earnings band leaving £332 on which 8% per year goes into retirement planning - about 50p per week!

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