On 04 December 2018, the Department for Work and Pensions (DWP) produced their ‘Review of the automatic enrolment earnings trigger and qualifying earnings bands for 2019/20’ supporting analysis.
The Governing Principles
Section 14 of the Pensions Act 2008 makes an annual review a statutory requirement and sets out factors that the DWP may take into account. There are three established principles that the DWP uses, all discussed at length in the supporting analysis:
- Ensuring the right people are bought into pension saving (via Auto-Enrolment / workplace pensions) by reviewing the Earnings Trigger
- Ensuring an appropriate portion of earnings are taken into consideration for contributions by establishing the Qualifying Earnings Bands (QEBs)
- Ensuring a balance between the benefits to workers and the cost to employers whilst maintaining simplicity
It is important to say that the report contains only conclusions and proposals. These are:
- The Earnings Trigger should be maintained at £10,000
- The QEBs should remain linked with the National Insurance thresholds (Lower and Upper Earnings Limit)
Therefore, the DWP proposes the following annual figures (with the 18/19 rates detailed as well for comparison):
|QEB Lower Limit||£6,032 (LEL)||£6,136 (LEL)|
|QEB Upper Limit||£46,350 (UEL)||£50,000 (UEL|
Note that the 04 December 2018 analysis also makes reference to the 2017 ‘Maintaining the Momentum’ review of Auto-Enrolment. Several times in this review are two proposals:
- To reduce the lower Eligible Jobholder age limit from 22 to 18 and
- To remove the QEB Lower Limit
Whilst the DWP’s December QEB and Trigger proposals does not make reference to lowering the age from 22 to 18, it does make reference to the removal of the QEB Lower Limit. It confirms that this is still the UK Government’s intention but will not be done until the ‘mid 2020s’.
Employers should be aware that these proposals combined will bring more people into workplace pensions and increase pension costs on both the worker and the employer.
Pay Reference Period Values
For common Pay Reference Periods, the above proposals translate as follows though, at the time of writing, these have not been confirmed by The Pensions Regulator (TPR) – and they are still proposals anyway:
|Auto-Enrolment Thresholds 2019/20|
|Weekly||2 Weekly||4 Weekly||Monthly||Quarterly||6 Monthly|
|QEB Lower Limit (LEL)||£118||£236||£472||£512||£1,534||£3,068|
|QEB Upper Limit (UEL)||£962||£1,924||£3,847||£4,167||£12,500||£25,000|
There will be two pieces of legislation to look out for in early 2019:
- The Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2019 laid by the DWP in Great Britain under provisions in the Pensions Act 2008
- The Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order (Northern Ireland) 2019 laid by the Department for Communities in Northern Ireland under provisions in the Pensions (No. 2) Act (Northern Ireland) 2008
The complications of devolution mean that the Department for Work and Pensions owns the overall policy of reviewing and proposing amendments to the thresholds. However, the Department for Communities implements the policy in Northern Ireland and has no power to set different thresholds.