A trade body is asking the government to scrap auto-enrolment minimum triggers, as new data showed some 8.8 million workers are not currently saving into a pension scheme.
According to analysis from Trades Union Congress (TUC), the umbrella body for unions representing 5.6 million workers, in some occupations up to 85 per cent of the lowest paid are not in a pension scheme, and are missing out on the employer contributions that better paid workers receive.
In a report published yesterday (27 February), entitled Fixing the retirement lottery, the TUC stated that among highly-paid professionals earning more than £600 a week, nearly nine out of 10 are saving into a pension.
On the other hand, 85.8 per cent of those in sales or customer service jobs paying £100 or less a week are not members of a scheme.
Under the current auto-enrolment rules, only workers aged between 22 and the state pension age, which earn more than £10,000 in a single job will be auto-enrolled into a pension.
However, the Department for Work & Pensions (DWP) published in December its review of auto-enrolment, which will change the age workers are enrolled into workplace pension schemes from 22 to 18-years-old, and the way pension contributions are calculated, but only from the mid-2020s onwards.
There are now more than nine million people auto-enrolled in a workplace pension scheme.
In its report, the trade body makes a series of recommendations to the government, which include abolishing the earnings trigger, with employer contributions being paid from the first pound of earnings.
The TUC is also advocating that the current band of earnings used to calculate contributions - which excludes the first £5,876 of annual earnings from pensions - is complicated, and should be scrapped.
The body is also asking the government to set out a route map for raised contributions, with the view that these should achieve 15 per cent of salary – 10 per cent from the employer and 5 per cent from the employee.
From April, the auto-enrolment minimum total contribution – now at 2 per cent - will increase to 5 per cent, with the employee paying 3 per cent.
One year later, it will increase again to 8 per cent, with the worker paying 5 per cent.
A total of £17bn a year will be going into workplace pensions by 2019 to 2020 because of auto-enrolment.
According to Adrian Boulding, director of policy at Now: Pensions, "the discrimination that automatic enrolment is promulgating" is obvious when looking at national data.
He said: "Over three quarters of the workers excluded by the £10,000 rule are women. We also found an inadvertent racial discrimination, as proportionately, some ethnic minorities, including Bangladeshi, Pakistani, Chinese and Black African are more affected, as the number of those who earn less than £10,000 is higher than in the population as a whole.
"We support the TUC in calling for these inequalities to be phased out, and phased out faster than the government's mid-2020s timetable for moving pensions contributions to the first pound of earnings."
maria.espadinha@ft.com
