The Labour Government is under fire for a “missed opportunity” when it comes to pension policy as older Britons are now at risk of “falling short of the retirement they desire”, according to analysts.
Earlier today, the Department for Work and Pensions (DWP) confirmed that the annual earnings for workplace pension auto-enrolment will remain frozen at £10,000 for the 2025-26 tax year.
The decision means employers will continue to be required to place workers earning £10,000 or more into a workplace pension scheme, maintaining the same threshold as the previous year.
Pensions minister Torsten Bell announced the freeze in a written statement, emphasising the importance of ensuring automatic enrolment works effectively for individuals while remaining affordable for employers and taxpayers.
In his written statement, Bell emphasised that automatic enrolment must support those for whom pension saving makes economic sense. The minister stressed the need to balance this support while ensuring the system remains affordable for both employers and taxpayers.
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Labour is under fire for its pension decisions
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He said: “It is important that AE (automatic enrolment) works for individuals, supporting those for whom it makes economic sense to save towards their pensions whilst also ensuring affordability for employers and taxpayers.”
This latest decision from Labour to maintain the thresholds at their 2024-25 levels comes as part of the Government’s ongoing review of pension policies. Last year, Chancellor Rachel Reeves unveiled multiple changes impacting retirement savings.
While Reeves reiterated her commitment to the state pension triple lock, the Chancellor has received criticism for including pension pots as part of someone’s estate once they pass away.
As a result of this decision, an individual’s retirement savings could make push them above the inheritance tax (IHT), slapping them with a 40 per cent charge from HM Revenue and Customs (HMRC).
Furthermore, Reeves announced that the rate paid in National Insurance contributions from employers will rise from 13.8 per cent to 15 per cent come April 2025, placing further pressure on businesses.
Ian Futcher, a financial planner at Quilter, described the decision as “unsurprising” given the upcoming changes to employer National insurance contributions and continued financial pressures facing many people.
Futcher warned that while freezing the thresholds provides stability, it represents a missed opportunity to drive higher pension contributions. “While AE has transformed pension saving, those relying solely on minimum contributions may find themselves falling short of the retirement they desire,” he said.
The Government maintains it is committed to exploring long-term steps to improve pension outcomes. However, David Lane, Chief Executive of TPT Retirement Solutions, has previously criticised the lack of changes to auto-enrolment rules.
Torsten Bell, the latest Labour appointee has previously called for the state pension to be “replaced”
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He explained: “We believe the Chancellor missed the opportunity to increase pension tax relief to lower-rate taxpayers in this [latest] Budget.
“This would have made the system more progressive and made a significant difference in helping some lower earners save for retirement.
“The [Autumn] Budget was also a missed opportunity to cut the age of auto-enrolment into a pension scheme to 18 and remove the lower earnings limit to help younger and lower-paid workers save more.
“We hope these measures will instead be considered in the second phase of the Government’s Pensions Review expected next year.”
