Thousands more part-time workers and people on the lowest incomes are set to get pensions from their employers due to auto-enrolment thresholds being frozen.
Auto-enrolment is a system introduced in 2012 that requires employers to automatically enrol eligible workers into a workplace pension scheme.
Pensions minister Torsten Bell confirmed that the earnings threshold at which workers are automatically enrolled into their company’s pension scheme will be maintained at £10,000 next year.
For eligible workers, pension contributions will remain mandatory on the portion of their annual earnings between £6,240 and £50,270, known as the “qualifying earnings band”.
By keeping these levels the same, more people will be pulled into qualifying for a pension without having to do anything as wages rise in line with inflation, which could boost their retirement savings.
Part-time workers are most likely to be affected as they are particularly likely to have a low income, meaning they may not qualify for auto-enrolment and so are not saving for retirement.
David Robbins, a senior consultant at Willis Towers Watson (WTW), said: “In summer 2026, someone earning minimum wage will have to work half as many hours to be eligible for automatic enrolment into a workplace pension as they would have done in summer 2014.”
It comes amid a number of ongoing threshold freezes by the Government, which have usually been associated with making people poorer.
Tax thresholds have been frozen since April 2022 and will continue to be frozen until 2030/31, meaning that as wages rise to keep up with rising costs, people are pulled into higher tax bands, despite not being better off in real terms – known as “fiscal drag”.
But frozen auto-enrolment thresholds mean more people will start paying into a workplace pension, benefitting from contributions from their employer too.
This is good news at a time when the Government is concerned millions of people are under-saving for later life and will not be able to live comfortably on their pension income alone.
This is particularly the case for those on the lowest incomes or who do not benefit from auto-enrolment, such as the self-employed.
Some experts have called for the Government to make further changes to auto-enrolment, such as increasing the minimum amount that must be contributed to a pension from the current level of 8 per cent, or by even reducing the earnings threshold.
However, Jon Greer, head of retirement policy at Quilter, said that prioritising stability is the right decision now, and that freezing thresholds will still have a significant impact.
“Automatic enrolment has been one of the most successful public policy interventions of the past two decades,” he said.
“Freezing thresholds should not be mistaken for standing still. As wages rise and the lower earnings limit of the qualifying earnings band remains at £6,240, more of people’s earnings will be brought into automatic enrolment and a greater proportion of earnings will be subject to pension contributions.
“In effect, this creates a form of pensions fiscal drag, with contribution levels increasing arguably by default rather than through an explicit policy decision.”
Greer acknowledged that those on the lowest incomes may feel that they cannot afford to pay into a pension and that auto-enrolment could squeeze their finances further.
He said: “For workers, particularly those on lower incomes, this can feel like a squeeze on take-home pay, even though saving for retirement is clearly in their long-term interests. It reinforces the need for careful reform so that improving long-term adequacy does not inadvertently worsen short-term affordability.
“Stability today is sensible, but setting out a clear roadmap for how automatic enrolment will deliver better outcomes tomorrow will be crucial to maintaining confidence in the system.”
The Government revived its Pensions Commission earlier this year to look at the barriers stopping people from saving enough for retirement and what can be changed to fix this, and a report is due in 2027.
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It has already introduced several others measures designed to help boost retirement savings, including a plan to automatically combine millions of “small pots” worth £1,000 or less.
It also plans to roll out new kind of combined pension, called combined defined contribution (CDC) schemes, where workers’ and employers contributions will be pooled and invested to help them grow and provide a fixed income in retirement.
Torsten Bell said this could boost incomes by up to 60 per cent.
In his statement about freezing auto-enrolment thresholds, Bell said: “The main focus of this year’s annual statutory review has been to ensure the continued stability of automatic enrolment for employers and individual, particularly during the ongoing work of the Pensions Commission.
“This 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 under-saving.”
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