The Secretary of State for Pensions has announced that the Pension Earnings Threshold along with the Qualifying Earnings Lower Band and Upper Band are frozen at the same levels applicable from 6th April 2021.
This places the Lower Earnings Threshold (LT or LET) at a lower value than the National Insurance Lower Earnings Limit (LEL).
The automatic enrolment earnings trigger determines at what point an eligible person gets automatically enrolled into a workplace pension.
The qualifying earnings band sets minimum contribution levels for money purchase pension schemes. The minimum of the band is also relevant for defining who can opt in if they earn under the earnings trigger. The government reviews these every year and revises them if appropriate.
Under automatic enrolment, employers must enrol all workers into a workplace pension if they satisfy age and earnings criteria.
For more details see: Automatic enrolment: review of the earnings trigger and qualifying earnings band for 2022/23 – GOV.UK (www.gov.uk)
Check your Pension Scheme
If you are following the NI Lower Earnings Limits, then this does not meet the requirements for a qualifying AE Pension scheme. Ensure that your configuration rules are reviewed. If the scheme should be following the Pension Lower Threshold, then make sure the configuration is requested to be changed, else you may find that the contributions are under the minimums required and the employer is in breach of the Pension AE obligations.
What is the impact if we used the wrong value?
Where an employer is operating a minimum funded banded pension scheme and the appropriate Pension Reform Auto Enrollment thresholds have not been used, then the employer may find themselves in breach of Pension AE law and their scheme no longer qualifying. Employers will be obliged to enroll their employees into an alternate qualifying scheme.
To continue using a pre-existing scheme, the Pension Regulator will require employer to correct any errors as soon as possible, set the correct pension scheme contributions and deal with any underpaid contributions.
If an employer has continued to follow the National Insurance (LEL) in error as opposed to the Pension Reform Qualifying Lower Earnings Threshold (LET or LT), then there are potentially underpayments of contributions.
