It also released a report on workplace pension saving for lower earners which reveals that the complexity of the pension system, short term budgetary concerns and a lack of support from their employer are deterring them from saving into a pension. There was also a degree of misunderstanding that pension saving could lead to an erosion or elimination of benefit entitlement.
However, the qualitative report also found that low earners said that saving into a pension was desirable and important, while increasing auto-enrolment flexibility (eg the ability to change contribution levels easily, lowering the trigger for enrolment) and higher employer contributions would help.
Damon Hopkins, Head of DC Workplace Savings at leading independent consultancy Broadstone, commented: “The decision to maintain the lower earnings trigger for auto-enrolment will ultimately see more people enrolled in workplace pension schemes as their salaries rise which is good news.
“However, supporting research documents released by the DWP today expose the issues that lower earners face in building up adequate retirement savings.
“While many said they understood the importance of saving for their long-term financial security, there was a lack of understanding around the system as well as how it may impact their benefit entitlement. Unsurprisingly, shorter term financial pressures also impacted their ability or desire to save into a pension.
“It reveals the two key issues facing the country’s pension system at present – engagement with and understanding of how pensions work and the macroeconomic impact on disposable incomes. It demonstrates a significant opportunity for employers to support the financial wellbeing of their employees through greater financial education and providing access to solutions which improve both short and long-term financial security.”
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