Pensions inequality concerns raised by PPI report
- Published
Women, ethnic minority workers and employees in the service sector are less likely to qualify for automatic pension savings, a report has found.
A new system that automatically enrols workers into a pension scheme has been introduced gradually since 2012.
More than five million people have been enrolled as a result, receiving pension contributions from their employer.
But a report by the Pensions Policy Institute (PPI) shows that almost as many are ineligible to join.
A total of 4.8 million people are ineligible and not saving in a pension scheme.
The majority of them - 3.5 million people - do not earn the £10,000 a year minimum required to be included in the scheme.
How automatic enrolment works
Automatic enrolment started in October 2012. It is being introduced in stages. In June this year, firms employing fewer than 50 staff started the enrolment scheme.
A slice of an employee's pay packet is automatically diverted to a savings pot for their pension, assuming they are aged 22 or over and earning at least £10,000 a year.
Employers are obliged to pay in as well, with the government adding a little extra through tax relief.
Many pensions analysts have said that these savings, together with the state pension, will still be insufficient for an adequate pension income. The government has encouraged people to go further themselves when saving for their retirement.
Who is missing out?
The auto-enrolment system has widely been considered a success, owing to the large number of people being enrolled into a pension scheme compared with similar schemes around the world.
The PPI report suggested that 32% of employed women were ineligible to be enrolled automatically compared with 16% of male workers.
It also found employees from some ethnic minority groups were more likely to be below the earnings threshold required, most notably Bangladeshi workers.
Other findings included:
30% of workers with disabilities did not meet qualifying criteria
81% of carers did not qualify, often because they worked part-time and did not earn £10,000 a year
55% of employees in the service sector, such as retail, hotels and restaurant workers, qualified compared with 70% to 90% in other sectors
"The likelihood of meeting the automatic enrolment qualifying criteria is not evenly spread across the workforce," the PPI said.
"This should be a matter of concern to policymakers. The policy community will need to closely watch whether certain groups are in danger of being excluded from automatic enrolment, and discussions should be held about whether there are potential policy levers which need to be put in place to ensure greater equality of coverage."