Mark Futcher, Partner & Head of DC at Barnett Waddingham, comments: “The Government is well aware that we are heading towards a ‘cost of retirement crisis’. Its refusal to commit to plans to increase higher minimum contribution rates in the future is dangerous. Some hesitance in the face of the current cost of living crisis is understandable, but there’s no excuse not to be putting plans in place to get people closer to the 12% savings target in the next few years.
“If an increase to the contribution rates is not on the cards in the near future, the Government must prioritise scrapping the minimum earnings band, which currently sits at £10,000 per annum. This band means low earners are much more likely to be relying solely on the state pension at retirement, and also means they miss out on a substantial part of remuneration from their employers which higher earners get via employer pension contributions. This widens socio-economic disparity; it would be a relatively low-cost and easy change which would make our pensions system much fairer. A vague deadline of ‘the mid-2020s’ is not good enough; we need clarity now of the exact timelines and expectations on businesses.”
Research from Barnett Waddingham ahead of the 10th anniversary of auto-enrolment last October revealed:
• Despite 10 years of auto-enrolment, almost half of UK adults (46%) aren’t confident they’ll have enough saved for a comfortable retirement
• People are not saving enough for their future under auto-enrolment, and too many people fall through the gaps altogether
32% of UK adults have a defined contribution (DC) pension. This rises to 37% of the eligible age population for auto-enrolment (22-65 years old), and 46% of full time workers. More than two thirds (70%) of those with a DC pension are currently paying into that pension, while 28% are not – 2% aren’t sure.
• 13% of working Brits are excluded from auto enrolment due to their income structure – this is true of almost one in ten full time workers (9%)
One in five (20%) Brits don’t have any private or workplace pensions – they will only receive a state pension. This rises to 26% of women, compared to 13% of men.
13% of working Brits are excluded from auto-enrolment altogether due to their income structure – 10% have one job which earns less than £6,240 a year (below the lower level of qualifying earnings - LEL), while 4% have multiple jobs all of which earn less than £6,240 a year. This is led by those in part time work (30%), but is still true of almost one in ten full time workers (9%). It rises to 18% of those aged 55+ (and still working).
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