Industry experts have zeroed in on auto-enrolment eligibility and the ‘soft compulsion’ of the government’s workplace pensions reform as areas that could be improved to help close the retirement savings gap.
Office for National Statistics data released this week, covering the period before the onset of auto-enrolment, laid bare the extremely low levels of participation in private pensions savings across large sectors of the UK population.
Twitter talk
Pensions minister Steve Webb responded to these statistics in a Twitter conversation over adequacy.
On the question of lowering the earnings limit, the minister tweeted: "The key is enrolling the 'right' people; getting someone on £6k to put aside pennies to top up a £7.8k state pension??"
Hargreaves Lansdown's Tom McPhail tweeted: "Millions in danger of being left behind. Need AE+."
According to the report, 45 per cent of men and 49 per cent of women did not have any private pension savings in 2010-12.
In the accommodation and food services industries, 95 per cent of male and female employees did not have any private savings.
Experts noted the statistics provided a snapshot of the sector before the reform, but added the government’s work towards improving pensions savings and participation is far from over.
Tom McPhail, head of pensions research at platform provider Hargreaves Lansdown, said: “Numerous employees are missing out on opportunities in work-based pensions because they fall below the £10,000 threshold for auto enrolment.”
The likelihood of auto-enrolment bringing about real change for low-earners and transient workers was seen as low, industry experts said.
And while the number of people opting out has been carefully tracked, comprehensive data on the number of people actively choosing to opt in are less available.
Malcolm McLean, senior consultant at Barnett Waddingham, said it was up to lower earners to take the initiative to save what they can.
“But if they don’t there is the option of full-scale compulsion,” he added. “That could be a future prospect if auto-enrolment hasn’t delivered as well as it could.”
The number of people not captured by auto-enrolment has called into question the appropriateness of the £10,000 threshold. This level matches the personal tax allowance, which aims to benefit lower earners.
Shadow work and pensions secretary Rachel Reeves announced in May that a future Labour government would extend auto-enrolment by reducing the threshold to £5,733, while the Liberal Democrats plan to raise the annual tax-free allowance to £12,500.
