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Glasgow
+44 (0)141 221 2984

Edinburgh
+44 (0)131 225 6366

Stirling
+44 (0)1786 451745

Dumbarton
+44 (0)1389 765238

Hamilton
+44 (0)1698 459444

French Duncan

Auto-enrolment: the first deferral

17 December 2015

When auto-enrolment into workplace pensions started in October 2012, the legislative intention was that the level of contributions as a percentage of qualifying earnings (those between £5,824 and £42,385 in 2015/16) should rise from the current minimum total of 2% to 5% from October 2017 and then 8% from October 2018. In his Autumn Statement, the Chancellor pushed out both increase dates by six months “to help businesses with the administration of this important boost to (the) nation’s savings”.

There had been no clamour for an April alignment from business groups – the greater concern has been the impact of the huge increase in the number of employers registering in the next year. The real reason for Mr Osborne’s administrative simplification was to be found in the Autumn Statement ‘scorecard’ which showed the deferral would save the Exchequer nearly £850m in employer and employee tax relief over the two tax years involved.

Auto-enrolment has always been a double-edged sword for the Treasury: while it should mean less state support for the retired in the long term, the immediate impact is negative because of the rise in pension contributions and hence tax relief. Already the process has brought over five million people into workplace pensions. As the government’s decision on the future of pension taxation has been deferred until the March 2016 Budget, this latest tweak could be seen as a pre-emptive grab of future benefits. Whether or not that proves to be the case, the argument for maximising your pension contributions before the Chancellor’s next set piece has been reinforced.