It is now 8 years since a Conservative Government asked for a review of AE bands by what became known as the 2017 AE review; here it is – download here – more people saving more money – a solution that has been abandoned.
It is now past halfway in this decade. So we have missed implementing the recommendations to “maintain the momentum” by substantially increase contribution rates against wider bands of earnings from a younger age.
That was December 2017 and this is December 2025. Ruston Smith, Chris Currie and Jamie Jenkins are still about but it is not they but the Pension Commission that it’s hoped will take up the 138 pages of reports they inherit.
The door slams shut on 2025 and with it 2017 AE reforms. as Pensions minister Torsten Bell has confirmed auto-enrolment (AE) thresholds will be maintained at the current levels for 2026/27, following the statutory annual review.
This is what he has to say
Automatic enrolment has transformed workplace pension saving for millions of workers. However, despite this success, the Government recognises that millions are still undersaving for their retirement. That is why we have revived the landmark Pensions Commission to finish the job we started 20 years ago. The Commission will examine why tomorrow’s pensioners are on track to be poorer than today’s and make recommendations for change.
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, which are the earnings trigger and lower and upper earnings limits of the qualifying earnings band. The main focus of this year’s annual statutory review has been to ensure the continued stability of automatic enrolment for employers and individuals, particularly during the ongoing work of the Pensions Commission which will explore long term questions of adequacy and how to improve retirement outcomes, especially for those on the lowest incomes and at the greatest risk of poverty or undersaving.
The thresholds review has therefore concluded that all automatic enrolment thresholds for 2026/27 will be maintained at their 2025/26 levels.
The 2026/27 Annual Thresholds:
The automatic enrolment earnings trigger will remain at £10,000.
The lower earnings limit of the qualifying earnings band will remain at £6,240.
The upper earnings limit of the qualifying earnings band will remain at £50,270.
This is the written statement today (18 December).
We have a view which we can consider consensual within the ABI, Pensions UK and most consultants.
This from Professional Pensions
Broadstone head of DC proposition Kelly Parsons said the decision to maintain the current AE earnings trigger and qualifying earnings band for another year is
“largely a formality and was widely expected”.
“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.
Fiscal drag for pension savings?
“At the same time, holding the AE thresholds steady has a quietly powerful effect, akin to fiscal drag in taxation. With the trigger remaining at £10,000 and the qualifying earnings band fixed between £6,240 and £50,270, rising wages mean more employees are brought into pension saving and contributions increase organically, even without changes to headline rates.
“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.
“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.”
Most small firms see AE as a tax akin to national insurance and not a means for employees to save into a pot. Most large employers set a pension contribution with regard to what their competitors are doing and not the minimum contribution rate. It is a shame that in doing nothing, Torsten Bell is framed as employing Fiscal Drag to increase saving. There has always been an assumption that contributions will go up over time as people earn more but a band of earnings, such as this caps at the bottom and the top, this to me is a reasonable holding position.
If the Pension Commission have a job, it is not to repeat the work of Curry, Smith and Jenkins in 2017, it is work out a way of convincing people that all these “taxes”, including AE are for their benefit and that they are a means of retiring somewhere close to the lifestyle they had before they retired. Giving people the option of an opt out of pensions is not enough to stop pensions being considered a tax but we need people seeing the opt-out as unnecessary. Just as Bell talks of the mandatory power to demand a growth strategy in investment. So long as these options exist, we hope they will encourage different behaviour!
Governments , especially this one, find themselves accused of getting their way through taxation and with Bell we have a Minister abandoning a planned “tax” in increased mandatory AE contributions. Instead of a tax , we are getting improved pensions resulting from the Pensions Bill and the recently concluded work on multi-employer CDC.
My hope is that we win hearts to pension contributions. That is the challenge of the Pension Commission, they are not an annexe to HMRC.
