UK. More than 8.6mn missing out on workplace pension savings
More than 8.6mn people from “underpensioned” groups are missing out on workplace pension savings, according to a report by Now Pensions.
The report, published on December 7 in collaboration with the Pensions Policy Institute, found a number of common factors within these groups that are causing barriers to saving, including non-traditional work patterns, a lower percentage of homeownership, and being impacted by inequalities in the labour market.
People from underpensioned groups – including ethnic minorities, people with disabilities, carers and single mothers – have private pension incomes that range from 18 per cent to 64 per cent lower than the UK average.
The Underpensioned Index 2022 found that the pension savings gaps for some of the most financially at-risk groups have worsened since the 2020 index was first published.
Employment rates of the underpensioned groups, especially for members of certain ethnic groups, remain well below the UK population average.
Meanwhile, women’s average annual incomes are 80 per cent of the UK average and 67 per cent of men’s average annual incomes.
For single mothers, this figure is substantially lower at just 60 per cent of the UK average.
Since 2018, the gap between women’s average incomes and the UK average has grown from 12 per cent to 20 per cent.
The report also found that of the 14.6mn employed women in the UK, around 2.5mn (17 per cent) do not meet the qualifying criteria for automatic enrolment, compared with 8 per cent of male employees.
Around 1.9mn women earn below the earnings threshold of £10,000.
Now Pensions head of campaigns and report author Samantha Gould said: “There are a total of 8.6mn people in underpensioned groups that are locked out of auto-enrolment, missing out on potentially billions of pounds of pension saving annually.
“We have been campaigning on behalf of underpensioned groups since 2019. Our latest report has revealed that private pension incomes were less than 85 per cent of the population average, with some groups experiencing significant declines compared with our 2020 index.”
Gould said that while the current economic environment means it is challenging for the government to implement potential remedies, “doing nothing is not an option”.
“Action is needed now to reduce the pensions gap and allow everyone to enjoy the comfortable retirement they deserve,” she said.
Some underpensioned groups in the UK are reaching retirement with private pension incomes of just £2,850.
Getting more people saving via auto-enrolment would be the most effective way to start closing the current savings gaps faced by the UK’s underpensioned, according to Now Pensions.
The report made policy proposals to close the current savings gaps for these groups in order to help boost financial later-life equality.
The removal of the £10,000 auto-enrolment trigger would get 3mn more people from underpensioned groups saving into workplace pensions.
If the earnings trigger was removed, assuming minimum required contributions on band earnings were made, lower earners could have made around £273mn in contributions over a one-year period in 2021, with £102mn from employer contributions and £171m from employee contributions.
Pension contributions from the first £1 would increase pension wealth for these groups by an average of 30 per cent, though for some groups, such as single mothers, this would increase by 52 per cent.
If both policies were introduced, there would be an additional £1.2bn in annual pension contributions.
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