AE thresholds frozen again
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Pensions auto-enrolment thresholds will be frozen for 2026-27 “to ensure the continued stability of of automatic enrolment for employers and individuals, particularly during the ongoing work of the Pensions Commission”, the pensions minister has said.
Torsten Bell made a written statement on Thursday announcing that the lower earnings threshold will stay at £6,240 and the upper threshold at £50,270. The £10,000 earnings trigger from a single employer also remains unchanged.
Bell pointed to the Pensions Commission that is currently assessing the challenges facing current and future pensioners and will make recommendations on how to address these, adding: “It is against the backdrop of the Commission’s work that I have considered and completed this year’s annual statutory review of the automatic enrolment thresholds.”
Auto-enrolment thresholds are subject to an annual review but have remained frozen for several years now. The lower earnings threshold is at the same level as it was in 2020-21, while the upper threshold has been frozen at its 2021-22 level.
The earnings trigger has never been changed, despite some in the pensions industry arguing that it is the main hurdle excluding multiple jobholders – mostly women – from pension saving and should be abolished.
In 2017, the Automatic Enrolment Review recommended scrapping the lower earnings threshold so employees start to save for pensions from the first pound earned, and to lower the eligible age from 22 to 18. Powers to do so were passed into law in 2023, but none of the work and pensions secretaries holding that power since then has implemented the changes.
Auto-enrolment thresholds are subject to an annual review but have remained frozen for several years now. The lower earnings threshold is at the same level as it was in 2020-21, while the upper threshold has been frozen at its 2021-22 level.
The earnings trigger has never been changed, despite some in the pensions industry arguing that it is the main hurdle excluding multiple jobholders – mostly women – from pension saving and should be abolished.
In 2017, the Automatic Enrolment Review recommended scrapping the lower earnings threshold so employees start to save for pensions from the first pound earned, and to lower the eligible age from 22 to 18. Powers to do so were passed into law in 2023, but none of the work and pensions secretaries holding that power since then has implemented the changes.
As well as abolishing the lower threshold, in the debate about improving adequacy the pensions industry has repeatedly called for higher minimum contributions. However, Bell said earlier this year that there would be no contributions increase in this parliament, which is due to end in 2029. Some even think the Pensions Commission, reporting in 2027, might not recommend higher contributions either.
The decision to maintain the current automatic enrolment earnings trigger and qualifying earnings band for another year was widely expected, said Kelly Parsons, head of DC proposition at consultancy Broadstone.
The decision to maintain the current automatic enrolment earnings trigger and qualifying earnings band for another year was widely expected, said Kelly Parsons, head of DC proposition at consultancy Broadstone.
“While stability and predictability for employers and savers are welcome, freezing these thresholds highlights a deeper challenge around retirement adequacy. Ultimately, improving outcomes will require higher contributions over time, but that is not a straightforward fix. Higher rates risk pushing lower earners to opt out altogether as households juggle competing financial pressures, while increases at the lower end of earnings often deliver only modest gains to pension pots," she argued.
Parsons pointed to the effect of freezing thresholds, which brings more earners into pensions and increases contributions.
Parsons pointed to the effect of freezing thresholds, which brings more earners into pensions and increases contributions.
“However, this passive mechanism also underlines the urgent need for a broader, more deliberate approach. Improving awareness of the impact of starting late, career breaks and periods of non-saving is just as important as contribution rates, particularly for younger and lower-paid workers," she said.
“The forthcoming work of the Pensions Commission will therefore be crucial. A credible long-term plan is needed – one that balances gradual contribution increases with clearer policy intent across the different pillars of pension provision. Without that, we risk simply storing up larger problems for future retirees and the state.”
