The Trade Union Congress (TUC) has urged the Government not to raise the lower earnings threshold at which auto-enrolment will kick in, in a move it says would hit women hardest.
The Government have been considering proposals to raise the lower earnings threshold at which employees will need to be auto-enrolled to bring it in line with the income tax personal allowance, which will be £8,105 for the 2012-2013 financial year, but is set to rise to £10,000 over coming years.
Raising the threshold in this way could leave as many as 1.8 million women, who make up a disproportionate amount of low earners, missing out on the benefits of auto-enrolment. The TUC said in a statement:
"Women would be the main losers from the new earnings trigger as the vast majority of workers with pay between the lower limit of the earnings band and the income tax threshold are women working part-time."
Around 500,000 male workers would also be affected if the proposal was to go ahead.
Auto-enrolment forms part of new pension law changes that will be phased in from October 2012, and will mean that qualifying job-holders will automatically become a part of a pension scheme from which they can choose to opt out.
Under current plans workers will be auto-enrolled once they earn above £7475- the 2011-2012 income tax personal allowance. Lower earning eligible job-holders will be allowed to opt in if they earn above £5564 and below £7475, but they will not be auto-enrolled.
The changes to pension law will also mean that employers have an obligation to offer pension contributions to all auto-enrolled employees, and to any employees who are earning above £5564 who choose to opt in.
The changes to pension law are designed to encourage pension savings.
The General Secretary of the TUC, Brendan Barber, said:
"Auto-enrolment is a huge advance. But no-one can pretend that contributions are good enough, particularly during the long wait before every company is covered by auto-enrolment and the two years after that before everyone gets their full contribution.
"The government should use its review of the thresholds to widen the earnings band each year by freezing the lower limit, while increasing the upper band limit in line with earnings. This would give a small manageable increase in the earnings band each year. It's the pensions equivalent of fiscal drag - raising more tax by freezing tax thresholds.
"In particular we urge the government not to raise the auto-enrolment earnings trigger in line with the income tax threshold, which the coalition is keen to raise to £10,000. Whether this is the best way to help the low-paid is an interesting debate, but it would be disastrous if it had the unintended consequence of excluding a significant proportion of women workers from pensions saving."
The Department of Work and Pensions said that they would announce their decision in the near future.