As the government begins its first review of workplace pensions, Hargreaves Lansdown is demanding a shake-up of the auto-enrolment system.
The investment broker and advice firm wants ministers to introduce five key changes to the workplace pensions system, brought in in 2012, to ensure more workers can contribute and are encouraged to save. The government starts its inaugural review of auto-enrolment in December.
Hargreaves Lansdown's recommendations include reducing the qualifying earnings level from the current £10,000 to that of the new state pension - £8,093 - to ensure more self-employed and part-time workers contribute.
Reducing the earnings level would help include more part-time workers and, in doing so, help more women provide for their retirement, it argues. Part-time workers are more likely to be female.
Currently, those earning the National Living Wage must work 15.56 hours a month before accruing their state pension and are enrolled after working 26.67 hours a month. Bringing the earnings trigger in line with the new state pension would cut this requirement by five hours a month to 21.62 hours.
Hargreaves Lansdown also suggested that employees be allowed to contribute from the first pound they earn, rather than the current system in which contributions are not paid on the first £5,824 of earnings. This, it argues, adversely affects lower earners.
The broker also recommends that contribution levels be raised, and that a further review take place in autumn 2019 after the current scheduled contribution level rises to 8 per cent have been phased in.
Further recommendations include encouraging self-employed workers to save for retirement by collecting contributions via new digital HMRC tax accounts which are then paid to NEST, and ensuring that both employed and self-employed workers have choice over where their workplace pension contributions are paid.
"The auto-enrolment review must home in on two key areas; get more people saving and get them more interested in their savings," said Nathan Long, senior pension analyst at Hargreaves Lansdown.
"Dropping the level of earnings needed before being put into a pension will ensure more part-time workers are included, whilst including the self-employed will help the 4.2 million who are currently sat on the sidelines without an employer.
"Auto-enrolment of the self-employed can happen through the roll out of HMRC’s digital tax accounts and will allow tax and pension contributions to be collected at the same time."
For auto-enrolment to succeed, there needs to be greater worker engagement and take-up, said Lane.
"The success of saving for retirement is inextricably linked to high levels of engagement," he said. "Allowing both employed and self-employed pension savers to have their auto-enrolment contributions paid into their own pension if they prefer will help people take complete control of their retirement.
However, while the broker thinks contribution levels must increase, Lane says making decisions too before the already scheduled contribution uplifts in April 2018 and 2019 could be "catastrophic".
"The opt-out behaviour of pension savers at these two points could give rise to a completely different direction for legislation," he said.