Still No Change In Automatic Pension Enrolment Thresholds.. but what does it mean!

The government has confirmed that there will be no revisions to automatic enrolment in workplace pensions for 2025/26.

For a government facing an investment shortfall following a £40 billion tax increase, the figure of around £3,000 billion represented by pension assets would appear a very tempting source of capital. That is why Chancellor Rachel Reeves has followed her predecessor, Jeremy Hunt, by consulting on reforms aimed at “Unlocking the UK pensions market for growth”. The proposals focus on encouraging pension funds to consolidate and invest more in UK companies and infrastructure.

One pensions area where successive governments have shown less interest is automatic enrolment (AE) in workplace pensions. Over the longer term, AE has been a great success, raising the proportion of employees in a workplace pension from 46.5% in 2012 to 79.4% by 2021. However, the contribution structure is looking increasingly outdated.

The neglect was underlined by an announcement from the Department for Work & Pensions in January that for 2025/26:

• The earnings threshold at which an employee is automatically enrolled would remain at £10,000 a year, unchanged since 2014/15; and

• The band of earnings to which the unchanged 8% minimum contribution rate applies will continue at £6,240 – £50,270, as it has been since 2021/22.

The minimum entry age for AE remains at 22, even though the National Living Wage is now payable from age 21. In 2023, legislation was passed that gave the government powers to lower the AE minimum wage and to remove the floor for contributions, meaning 8% would be payable from the first £1 of earnings. Those powers remain unused.

There is broad consensus among pension experts, echoed in a House of Commons report from 2023, that the 8% contribution level is insufficient. An oft-referenced comparison is the Australian equivalent of AE, under which mandatory contributions are currently 11.5%, rising to 12% in July 2025.

The government’s stance, as put forward by Emma Reynolds when she was pensions minister, is that increasing UK investment by pension funds has a greater priority than raising AE contributions. Another way of looking at that position is that bringing your pension contributions up to a realistic level is in your hands..

The value of your investment and any income from it can go down as well as up and you may not get back the full amount you invested.