“Due to the pandemic, 2020 was a challenging year, but overall the workplace participation rates held up at 78%. However, the weaknesses in the auto-enrolment criteria are evident. This is clearly demonstrated by the stark disparity between public and private sector workplace participation rates for those who don’t meet the auto-enrolment criteria on the grounds of age or not meeting the annual earnings trigger of £10,000 in a single job. Employers in the private sector are more likely to stick to the auto-enrolment criteria, whereas in the public sector pension are more likely to be open to all employees based on full earnings.
“In 2020, 90% of public sector employees were in a workplace pension, compared to only 73% in the private sector. Employees are eligible to be auto-enrolled into a workplace pension once they earn more than £10,000 a year and, are aged between 22 years and State Pension Age (SPA). The pension divide is clearly demonstrated by those under aged 22, the minimum age to be auto-enrolled into a workplace pension. In the private sector, only 16% of this group were in a workplace pension scheme; the number was five times higher for those working in the public sector. It’s a similar story for those over the SPA where employees in the public sector are twice as likely as those in the private sector to be in a workplace pension.
“The pensions gender gap is clear to see amongst part-time employees in the private sector, with almost twice as many part-timers working in the public sector belonging to a workplace pension. Around three times as many women as men work part-time, and with median earnings for part timers at £11,000 a year, many will not have met the auto-enrolment criteria. Although women working full-time had slightly higher participation rates than men (female, 88%, males 85%), the pensions gender gap is set to persist for many years due to women earning on average 7.4% less than their male peers. Lower earnings, means lower contributions and lower pensions, which is compounded by women being more likely than men to take time out of work for caring responsibilities.
“It’s time for the government to begin to close the disparity in pension participation rates between the public and private sector by setting out a timetable to implement the 2017 auto-enrolment review recommendations, and make pension saving the norm for all employees. Reducing the minimum age for auto-enrolment to age 18, and removal of the SPA maximum age will go some way to this. Calculating pension contributions from the first pound earned, rather than from a lower earnings limit will increase the total auto-enrolment contributions.”
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