January 25, 2022

Changes to Automatic Enrolment Workplace Pension Limits from 6th April 2021

The government has confirmed the minimum automatic enrolment “qualifying earnings” contribution amounts from 6th April 2021 to 5th April 2022.

The existing threshold of earnings that need to be reached before a worker is automictically enrolled into a pension remains at £10,000.

For the absolute minimum contribution calculations, using the qualifying earnings definition of salary, the lower earnings limit of the qualifying earnings band will also be frozen at £6,240 and the upper limit increased to £50,270, compared to £50,000 in the tax year 2020/21.

This means that an employer only needs to make payments on earnings between £6,240 & £50,270.

For workers earning less than £50,270, this saves the employer a total of £187.20 in pension contributions and unless the employee specifies that they want to pay a personal contribution on all of their salary, this saves them £249.60 a year.

If these extra amounts were paid into the pension, they could significantly boost the money available for someone to live off when they stop work when they are older. For the lowest paid workers, those on the national living wage or not far above, this could make the biggest difference.

Just because there are minimum contributions doesn’t mean that employers can’t choose to be more generous.

The use of a lower earnings limit for pension calculations was rare for investment style pensions, such as stakeholder and group personal pensions, before auto enrolment began.

Changing the law so that payments are calculated from the first pound a person earns will make a real difference to so many lower paid workers.

It will come down to affordability for many employers but improving these benefits will make a real difference for those people who will rely on this money the most.

People do choose to retire from work or at least from full time work if they think they have enough money.

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