Last week, two significant pension auto-enrolment modifications received approval from Royal Assent.
1) Businesses utilising ‘Qualifying Earnings’ as their pensionable salary benchmark will witness a shift in contributions, now applied to the initial £1 earned, no longer offset by the LEL, which stands at £6,240 per annum.
2) The eligible enrolment age for employees will be reduced from 22 to 18.
It’s crucial to note that these alterations’ effective date has not yet been determined. Nonetheless, companies are encouraged to start planning for these changes promptly.
Reducing the automatic enrolment age implies individuals will save more – a positive development.
Additionally, altering the qualifying earnings definition will be advantageous for basic rate taxpayers, as contributions will now be calculated based on their total earnings without the previous offset of £6,240. This is positive news for this group of taxpayers.
However, it’s important to highlight that higher-rate taxpayers remain subject to the upper earnings limit of £50,270.
It’s anticipated that these changes will lead to increased costs for companies.
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