Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2021 — House of Lords, 2021-02-25
Topic: Labor
Deborah Stedman-Scott (Conservative, Centre-right): My Lords, I am pleased to introduce this instrument, which, subject to approval, reflects the conclusions of this year’s annual review of the automatic enrolment earnings thresholds required by the Pension Act 2008. The review considered the earnings trigger and the qualifying earnings band for the tax year 2021-22 The earnings trigger determines the point at which a qualifying worker becomes eligible for automatic enrolment in a qualifying workplace pension. The qualifying earnings band determines the earnings upon which workers and employers pay contributions into a workplace pension. This order sets a new upper limit for the qualifying earnings band and is effective from 6 April 2021. The lower earnings limit is not changed within the order and remains at the level set in the automatic enrolment threshold review order of 2020-21, so no further provision is required. Similarly, the earnings trigger is not changed within this order and remains at the level set in the automatic enrolment threshold review order of 2014-15, so no further provision is required. I am satisfied that the Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2021 is compatible with the European Convention on Human Rights Automatic enrolment has been a hugely successful policy resulting in over 10 million workers being enrolled into workplace pension savings since 2012. Over 1.7 million employers have met their automatic enrolment duties. Automatic enrolment has become business as usual for employers and workers, and this success, supported by all sides of this House, is something that we all can celebrate. Automatic enrolment is re-establishing a culture of retirement saving and making workplace pension saving the norm for a new generation. However, that does not mean that it is mission accomplished. The Government recognise that there is still more to do as we continue to work towards our commitment of helping people to achieve greater financial security in retirement. We also understand that there is more to do for those who are not saving into a workplace pension, which is why we look at the automatic enrolment thresholds annually, ensuring that the coverage remains right As noble Lords will be aware, the Automatic Enrolment Review 2017: Maintaining the Momentum, set out our ambition to remove the lower earnings limit and lower the age threshold in the mid-2020s. While I recognise that there has been a reasonable degree of interest in when these measures will be implemented, we also must consider how they will be implemented and find ways to make them affordable for all parties It is important to recognise that the success of automatic enrolment has been achieved through a considered and systematic approach to implementation over a period of years which recognises the need to understand and manage the impact on employers and individuals as well as taxpayers. That is why the 2017 review report was clear that implementation will be subject to learning from changes in the automatic enrolment minimum contribution rates, discussions with employers and others on the right approach, and on finding ways to make these changes affordable. As with other areas of public policy, it is important that we pay close attention to the impact and costs of making changes and consider the optimal approach on implementation. This has been further highlighted by the impact of the pandemic and our overall support for the economic recovery. We will continue to support long-term saving, balancing the needs of savers, employers and taxpayers Helping people save for their futures remains a key priority for the Government, and the automatic enrolment duties continue to apply to all employers with eligible workers. We continue to monitor the impacts of Covid-19 on savers, employers and the pension industry. As part of supporting the UK’s economic recovery, our aim remains to help workers achieve greater financial resilience for the long term Turning specifically to this order, it determines key elements of the framework for the way in which automatic enrolment operates. It will continue to align the lower and upper limits of the qualifying earnings band with the national insurance lower and upper earnings limits for the 2021-22 tax year. The lower and upper limits are therefore £6,240 and £50,270 respectively. By continuing to align the qualifying earnings band limits to the national insurance thresholds, the changes relating to payroll systems are kept to a minimum The purpose of this framework is to balance the need to encourage individuals to take personal responsibility for pension saving with a sustainable compulsory minimum contribution level for all employers. Setting the thresholds at these levels will also ensure that contribution levels continue to be meaningful for savers. In doing so, we are mindful of the economic environment within which these changes are taking place. The order does not change the earnings trigger, which remains at £10,000 this year. The Government’s objective in confirming this threshold is, on the one hand, to strike a balance between bringing in those for whom it makes economic sense to be saving into a pension, and, on the other, affordability for employers and workers. Again, we must be mindful of the broader economic context. Individuals earning below the £10,000 earnings trigger but above the lower earnings threshold will still have the choice to opt in to a workplace pension and benefit from employer contributions, should they wish. Those earning below the lower earnings limit also have the option of being enrolled by their employers in a pension scheme. To conclude on this point, the decision to maintain the earnings trigger at £10,000 and maintain the alignment of the lower and upper limits of the qualifying earnings band with the national insurance lower and upper earnings limit for the 2021-22 tax year maintains simplicity and consistency, while minimising burdens on employers and continuing to increase the total pension savings this year by an estimated £14 million I commend this instrument to the House and beg to move.