A new report has identified the private pension savings of underpensioned groups in the UK and has been published by NOW: Pensions, the workplace pension provider for almost 2 million people. The report found a number of common factors within these groups which are presenting barriers to saving, including non-traditional work patterns, a lower percentage of homeownership, and being impacted by inequalities in the labour market.
The new “Underpensioned Index 2022”, created in collaboration with the Pension Policy Institute (PPI), reveals that the pension savings gaps for some of the most financially at-risk groups have worsened since the 2020 index was first published:
- Employment rates of the underpensioned groups, especially for members of certain ethnic groups, remain well below the UK population average.
- Women’s average annual incomes are 80% of the UK average and 67% of men’s average annual incomes.
- For single mothers, this figure is substantially lower at just 60% of the UK average.
- Since 2018, the gap between women’s average incomes and the UK average has grown from 12% to 20%.
Of the 14.6 million employed women in the UK, around 2.5 million (17%) do not meet the qualifying criteria for automatic enrolment, compared to 8% of male employees. 1.9 million women earn below the earnings threshold of £10,000, making up 79% of the workers who do not meet this qualifying criterion.
“There are a total of 8.6 million people in underpensioned groups that are locked out of automatic enrolment, missing out on potentially billions of pounds of pension saving annually. We have been campaigning on behalf of underpensioned groups since 2019. Our latest report has revealed that private pension incomes were less than 85% of the population average, with some groups experiencing significant declines compared to our 2020 index. Whilst the current economic environment means that it is challenging for the government to implement potential remedies, doing nothing is not an option. Action is needed now to reduce the pensions gap and allow everyone to enjoy the comfortable retirement they deserve.”
Samantha Gould, Head of Campaigns at NOW: Pensions and report author
Private pension incomes of underpensioned groups remain below three-quarters of average population private pension incomes, with some groups experiencing significant declines compared to the 2020 Index.
Private pension incomes of divorced women, people from ethnic minority backgrounds and people with disabilities have all declined compared to the population average since 2012. Single mothers’ private pension incomes have remained at 50% of the population average, while for women in general and carers the gap has narrowed, but not greatly.
Almost all groups will get the majority of their income in retirement from the State Pension
When private pension income is combined with State Pension and other benefits, most underpensioned groups will struggle to achieve incomes above the minimum PLSA retirement living standard of £10,900 per year for a single person and £16,700 for a couple.
NOW: Pensions policy proposals to create a fairer UK pension system
Getting more people saving via automatic enrolment would be the most effective way to start closing the current savings gaps faced by the UK’s underpensioned. NOW: Pensions’ report makes policy proposals to close the current savings gaps for these groups inorder to help boost financial, later life equality.
Removal of the £10,000 AE trigger would get over 3 million more people from underpensioned groups saving into workplace pensions.
If the earnings trigger was removed, assuming minimum required contributions on band earnings were made, lower earners could have made around £273m in contributions over a one-year period in 2021, with £102m from employer contributions and £171m from employee contributions.
Pension contributions from the first £1 would increase pension wealth for these groups by an average of 30% – though for some groups, such as single mothers, this would increase by 52%.
If both policies were introduced, we would generate an additional £1.2 billion in annual pension contributions.
For more information and pension advice visit fairpensionsforall.com.
