Much attention has been given recently to the government’s continued freeze on personal tax thresholds. However, there are other frozen thresholds that are equally important but receive far less attention.

Automatic enrolment pension thresholds have also remained largely unchanged for several years. As wages have risen over time, this freeze is having a growing impact on how much people are saving into workplace pensions.

A major success for workplace pensions

Automatic enrolment is widely regarded as one of the most successful pension policy changes of the past decade.

Introduced in 2012, the system requires employers to automatically enrol eligible employees into a workplace pension scheme and make contributions alongside the employee.

The policy began under the previous Labour government and was implemented by the Conservative government that followed. Since then, participation in workplace pensions has increased significantly.

Government data shows that more than 22 million people are now saving into workplace pensions, an increase of over 10 million since automatic enrolment was first introduced.

How the automatic enrolment thresholds work

To be automatically enrolled into a workplace pension, workers must currently:

• be aged between 22 and State Pension age
  
  
• earn at least £10,000 per year from a single employer
  
  
• work in the UK
  
  

Employees who earn less than £10,000 can still choose to opt in and receive employer contributions.

Once a worker meets the automatic enrolment threshold, pension contributions are calculated on a band of qualifying earnings rather than total salary.

For the 2025/26 and 2026/27 tax years, the qualifying earnings band remains:

• £6,240 – lower limit
  
  
• £50,270 – upper limit
  
  

The £10,000 earnings trigger has remained unchanged since 2014/15, while the lower and upper limits of the earnings band have also remained frozen in recent years.

Earnings have risen but thresholds have not

Since automatic enrolment was introduced in 2012, average weekly earnings in the UK have increased significantly. Data from the Office for National Statistics suggests that nominal average earnings have risen by roughly 60% over that period.

If automatic enrolment thresholds had increased in line with earnings growth, the entry threshold today might be closer to £13,000, with the qualifying earnings band stretching to somewhere in the region of £8,900 to £68,000.

Instead, the current thresholds mean that the range of earnings on which mandatory pension contributions are calculated has effectively shrunk in real terms.

What this means for higher earners

One consequence of the frozen thresholds is that a smaller proportion of higher salaries now falls within the qualifying earnings band used for automatic enrolment contributions.

When the scheme began in 2012, the upper earnings limit represented a much larger proportion of average earnings than it does today. As wages have grown but the limits have remained largely static, automatic enrolment contributions now cover a smaller share of higher incomes.

The government’s position has been that higher earners are more likely to make additional personal pension contributions outside the automatic enrolment system.

For many individuals, this means that relying solely on automatic enrolment contributions may not be enough to build the retirement savings they need.

Planning ahead for retirement

Automatic enrolment has significantly improved pension participation across the UK. However, the frozen thresholds mean that both employees and employers may need to think more carefully about long-term retirement planning.

For higher earners in particular, it may be worth reviewing whether additional pension contributions or other retirement savings strategies are appropriate.

Need advice on pensions or retirement planning?

Understanding how workplace pensions, tax relief and contribution limits interact can be difficult. At Inglis Accountancy, we help individuals and business owners understand their pension options and make informed decisions about long-term financial planning.

If you would like advice on workplace pensions, retirement planning or tax-efficient savings, get in touch on 01904 787 973 or book a call with our team.