The Department for Work and Pensions (DWP) has confirmed that thousands more savers will be automatically placed into workplace pension schemes, as the earnings "trigger" for auto-enrolment remains frozen for the coming financial year.
The department confirmed that the existing earnings threshold at which people are auto-enrolled, set at £10,000, will not change for 2022/23 and represents a "real terms" decrease in the value of the trigger.
The measure determines who is eligible to be automatically enrolled into a workplace pension by their employer in terms of how much they earn. As earnings rise, keeping the trigger at £10,000 will bring in additional 17,000 people into pension savings, compared with increasing the trigger in line with average wage growth, the DWP said.
Becky O'Connor, head of pensions and savings at Interactive Investor, said: "Wage rises will bring thousands more people into workplace pension savings in the next year as a result of the decision to freeze the auto-enrolment threshold at £10,000 - and that is a good thing.
"While pressure remains on the [UK] Government to reduce the threshold to help people on low incomes build up retirement savings, there is also a need to balance this against day-to-day income needs now.”
Becky continued: "Rises in the cost of living would make it hard to justify reducing the threshold currently and prioritising saving for the future rather than eating and heating now.
"At the same time, there are instances where people might have multiple sources of income, all below £10,000, so can afford to put some money into workplace pensions, but are not currently doing so.
"The [UK] Government needs to consider ways of reaching people who can afford to make pension contributions and are not doing so because they do not currently reach the threshold for auto-enrolment."
The rollout of auto-enrolment started in 2012 with the biggest employers, and eventually encompassed the smallest.
By the end of December 2021, over 10.6 million workers had been automatically enrolled and more than 1.9 million employers had met their duties.
Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, said: "Freezing these limits will certainly boost the number of people saving into a pension through auto-enrolment.
"Estimated figures say 17,000 people could be brought into workplace pensions, many of whom will be women who have previously not earned enough to be included.
"Helping them build a better financial future for themselves is a huge positive and can help them weather future financial storms such as the one we are currently facing as the cost of living is squeezed."
Employees' payments into their workplace pensions are boosted by top-ups from their employer, as well as benefiting from tax relief.
Minimum contributions into workplace pensions are currently set at 8% of the member of staff's eligible earnings. Within this, employers must pay in at least 3%, but they can choose to pay more.
Tom Selby, head of retirement policy at AJ Bell, said: "If minimum contributions are to be increased beyond 8% - say to 12% or higher - policymakers could consider creating a 'safety valve' so workers who feel they can't afford higher contributions can opt-down to 8%, rather than opting out altogether.
"Employers could also be encouraged to raise contributions as workers get older or salaries increase."
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