Recent PensionBee research found that 63% of workers are considering, or in the process of switching jobs, in a national context where job vacancies are at a 20-year high, at 909,000 as of June to August 2021. This is almost two and a half times the 381,000 vacancies in the same period last year. UK shortages are being driven by Brexit and the coronavirus pandemic and compounded by workers rejecting certain sectors due to their reputations for low pay and poor conditions.
Lower-paid and young workers could benefit if vacancies are made more attractive through Auto-Enrolment inclusion. This could increase the annual pension savings of low-paid, part-time, and younger workers by up to £1 billion, whilst making in-demand jobs more attractive. The government has previously committed to removing the £6,316 threshold, in addition to automatically enrolling workers from age 18, by the middle of this decade.
63% of those that are excluded from being automatically enrolled in pension schemes do not participate in a workplace pension, compared to only 22% of eligible employees. Workers that earn below £10,000 do not qualify for Auto-Enrolment, with part-time workers and those on zero-hours contracts most likely to be affected, as only earnings above £6,136 are included in calculations of minimum contributions. Workers aged under 22 also do not qualify. PensionBee believes that the rules of Auto-Enrolment should be altered so that all workers, regardless of age and income, are included in workplace pension schemes.
In the coming weeks, it’s speculated that Boris Johnson will announce an increase in the minimum wage for workers aged 23 and over to £9.42 an hour. While this may bring more part-time workers into the Auto-Enrolment system due to higher annual earnings, younger workers appear to be excluded from the policy change. The minimum wage for those aged 18-20 is currently £6.45 an hour and £8.20 for workers aged 21 to 24. Pension contributions are particularly important in the early years of a worker’s career so that they have ample opportunity to grow subsequent to being invested.
Many other countries are also experiencing labour shortages, including the United States, Canada, Australia, and some countries in the European Union. Growth of pensions that are invested in shares of UK, US, and other affected countries could slow down, and savers would need to save more towards their retirement. Access to essential items could also be disrupted, which could impact health and wellbeing.
Clare Reilly, Chief Engagement Officer at PensionBee, comments: “Sustained labour shortages can impact pension savers and retirees in a number of ways, including higher costs for consumers, which could stretch retiree incomes to cover essentials, like food, whilst leaving younger savers with less to put into their pensions. All workers are essential to a healthy and thriving economy, and it is not fair for some to be excluded from automatic enrolment in workplace pension schemes. The UK government is aware of this and has previously proposed to change the Auto-Enrolment policy to make it more inclusive. The current labour shortage provides an opportunity to act now and expedite this change to enable millions to start saving immediately, whilst making vacancies more attractive”.
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