Ten million people – that is the population of Sweden.
Figures released earlier this month by the Department for Work and Pensions say that it is also the number of workers who have been enrolled into a workplace pension thanks to auto-enrolment (AE), a very successful government policy built on cross-party consensus.
Official news stories from the DWP and The Pensions Regulator have praised the policy, while industry commentators have focused heavily on the work that is still to be done, and rightly so.
While 10m new savers is a great thing, more does need to be done.
Many people without a workplace pension have not been auto-enrolled because they are too young or do not earn enough from one job; and a further 15 per cent who are self-employed remain outside the system.
To make auto-enrolment work for everyone, the needs of those who still lack access to a workplace pension must be considered by government.
To increase AE coverage the government might focus on self-employed workers.
The key, in our view, would be devising a way of automatically enrolling self-employed people through the tax system.
While we recognise self-employed is an increasingly diverse population and that absent an employer their situation is different; a solution leaning on the power of inertia harnessing is the right one.
Part-time workers are also at high risk of ending up ‘under pensioned’.
If a person has multiple part-time jobs which take them over the earnings threshold of £10,000, they will not be automatically enrolled unless they earn over the required salary in one job.
This does not make sense and is unfair to women who are disproportionately represented in this group because of caring responsibilities.
Also excluded from saving are younger workers, those under the age of 22. The earlier someone starts saving for a secure financial future the better, and the wonder that is compound interest will even do some of the heavy lifting for them.
The government committed to bringing young people into the scope of AE in 2017 and should set out a timetable for doing this.
Similarly, in 2017, the government committed to removing the lower qualifying earnings band – meaning that AE pension saving will start from the first pound rather than the lower qualifying earnings band (currently £6,032). This would dramatically increase contributions, especially for lower paid workers.
For example, if you take a cleaner earning £14,164 a year (average salary based on ONS data), current pensions savings would be around £650.56. If you remove this minimum limit on earnings then this could increase to £1,133.12, meaning a 75 per cent raise in contributions.
Saving from the first pound would make sure that every pound of a person’s pay packet counts towards their pension contributions.