Over half a million low-paid workers, 80 per cent of whom are women, could lose thousands of pounds in employer pension contributions if ministers go ahead with plans to raise the earnings trigger for people to be auto-enrolled into workplace pensions, the TUC warns today (Friday).
Under pensions auto-enrolment, which started for staff in big companies earlier this month, employers and employees will pay contributions on earnings above £5,564, but only if staff earn above £8,105. However, the government is currently consulting on raising the lower earnings limit and the earnings trigger to £5,720 and £9,205 respectively.
The TUC submission to the government's review of auto enrolment thresholds for 2013/14 warns that raising the earnings trigger for auto-enrolment will cause hundreds of thousands of low-paid workers to miss out, unless they voluntarily sign up to the scheme.
TUC analysis of official earnings data shows that around 3.5 million workers earn less than £8,106 a year, and would therefore not be automatically enrolled into a workplace pension. Raising this trigger to £9,205 next April will mean a further 585,000 staff will fall below the earnings trigger.
Of those workers set to miss out on auto-enrolment if the earnings trigger is raised, 457,000 (78 per cent) are female and 506,000 (86 per cent) are part-time workers. Low-paid women and part-time workers are the least likely to be saving into a workplace pension and should be a core target for auto-enrolment, not the focus of those excluded from it, says the TUC.
If the government continues to raise the earnings trigger in line with the personal allowance, which will eventually rise to £10,000, an additional half a million workers could miss out on auto-enrolment.
The TUC submission is calling on the government to freeze the earnings trigger for auto-enrolment at £8,105, as well as the lower earnings limit at £5,564.
The TUC also wants the upper limit on employer contributions to be increased to £42,971 so that the proportion of earnings upon which pension contributions are made steadily rises each year.
TUC General Secretary Brendan Barber said: 'After years of union campaigning it's great to see pension auto-enrolment finally starting.
'With two thirds of employees no longer saving into a workplace pension, auto-enrolment cannot come soon enough if we are to start tackling the UK's growing pensioner poverty crisis.
'It's disappointing therefore to see that over half a million low-paid workers could soon be missing out. Women and part-time workers are the least likely to save into a pension. They should be a core target for auto-enrolment, not the main losers from government plans to restrict access to the scheme.
'The government should show they are fully committed to auto-enrolment by ensuring that as many people as possible are eligible to be enrolled into saving for a pension.'
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