PENSIONS
New study explores how to safely automatically enrol low earners into a workplace pension
Nigel Peaple, director of policy and advocacy, The Pensions and Lifetime Savings Association (PLSA) , shares the findings of a recent study on low earners and automatic enrolment (AE) I n the realm of pensions policy, there exists a significant knowledge gap when it comes to understanding and more money in their pockets today. However, it means they miss out on accumulating savings in a pension, as well
Characterising low earners The low earner population represents a complex demographic, comprising diverse subgroups who may be earning modest incomes for varying reasons. They may be earning lower amounts for a short period with potential for improvement in the future or have lower earnings for a longer period. Despite the variations in circumstances, the analysis demonstrated that among low earners, younger people are the most over-represented demographic group. However, there are also a significant number of people at the upper pre- retirement age and an over-representation of females. Low earners are also more likely to be paid by the hour compared to the wider working population. The analysis produced segments that represented key subgroups: l young people aged 16-22 working part- time, who may or may not be studying l low earning 30-49-year-old mothers l people aged 50-64 across a range of household circumstances.
addressing the needs of low earners in the United Kingdom. While various segments of the population have been subject to extensive research, individuals with low incomes who are still engaged in employment have remained relatively understudied. The PLSA commissioned the Pensions Policy Institute (PPI) to investigate the issue of low earners with the aim of investigating whether AE could provide a way of improving their retirement outcomes. ‘ Uncovering the profile of low earners in the UK and the potential for pension saving through auto-enrolment ’ is focussed on those who earn below £10,000, which means they aren’t currently automatically enrolled into employer workplace pension schemes. You can read the report here: https:// ow.ly/a3vB50PNmo2. The £10,000 earnings threshold for AE was employed to protect workers on the lowest earnings from saving for the future, when they might be better off having
as the 3% contribution their employer makes to their pension and pension tax relief. “In the realm of pensions policy, there exists a significant knowledge gap when it comes to understanding and addressing the needs of low earners in the United Kingdom” The research found that around one in nine employees are affected, equivalent to 3.17 million employees in 2022 (that’s people who meet the age criteria for AE but earn less than the trigger income of £10,000 a year).
Those at risk of over-saving The study sought to understand whether
| Professional in Payroll, Pensions and Reward | October 2023 | Issue 94 40
Made with FlippingBook - Online magazine maker