Changes to auto-enrolment push 170,000 out of pensions
The criteria for being automatically enrolled into a pension is changing, pushing thousands of people out.
Auto-enrolment, where workers are automatically entered into a pension which both their employer and the Government contribute to, is undoubtedly a good thing, helping to address the serious pension problems faced by many in the UK.
However, what's not such a good thing is that the earnings threshold for auto-enrolment into a pension is being increased to £10,000, meaning a further 170,000 workers will be excluded from joining.
Of those people, 120,000 are women.
Auto-enrolment
Millions of people in the UK aren’t saving enough, or anything at all, for their retirement. Auto-enrolment was launched to address that.
All employers are required to sign up, though the introduction of the scheme is phased, depending on the size of the employer. It is already live with large companies, and will start being implemented by medium-sized firms in the New Year.
Employees are automatically signed up to the pension scheme, if they are eligible. To be included you need to be aged 22 or over (and below State Pension Age) and, from April, earn more than £10,000. The equivalent of 8% of the worker's salary goes into the pension, of which at least 3% is from the employer. However, you can opt out if you wish.
For more, read Workplace pensions: what it means for you
Take control of your pension saving with a SIPP
Pushed out of pensions
Pensions Minister Steve Webb has confirmed the change to push up the ‘opt in’ limit from £9,440, which mirrors the personal tax allowance level, to £10,000.
Workers will still be able to ‘opt in’ to a workplace pension scheme if they’re earning less than the £10,000 threshold, though it's expected that take up will be low. The reason auto-enrolment was set up in the first place was because people weren't proactively setting up their own pensions. This problem still remains for those who are not eligible for the scheme.
Tom McPhail, head of pensions research for Hargreaves Lansdown, said changing the limit is risky because those people earning below £10,000 may not be saving enough money to live on in retirement.
“The Government is increasingly in danger of making the same mistake that the previous Government did on stakeholder pensions in 2001, by assuming that low cost is a guarantee of a successful outcome. You can have all the price caps and defined ambition ideas you like, but if you don’t get people to spend less and save more it will all be a waste of time,” he said.
The average part-time salary is just under £9,000 a year, which means that the majority of the UK’s part-time workers won’t be enrolled automatically.
Frances O’Grady, general secretary of the TUC, said: “It is time to break the link between the income tax threshold and the auto-enrolment threshold unless we want to turn auto-enrolment into a pensions system that predominantly benefits men.”
The Government is also changing the lower limit of qualifying earnings from £5,668 to £5,772 and the upper limit from £41,450 to £41,865.
Take control of your pension saving with a SIPP
More on pensions:
Why the over-50s must not ditch workplace pensions
Be a pension millionaire!
10 years of work required to get new State Pension
Lifestyling: the 'low risk' pension tactic that could decimate your pot
Workplace pensions: why you mustn't switch off!
More than 90% of employees happy to stay in a workplace pension
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I am sorry to be a bore Rebecca, but the word "criteria" is plural. The singular is "criterion" (like the theatre). You are in good company, lots of people in the BBC and newspapers also get it wrong. "The criteria for being automatically enrolled into a pension are changing". It's good to see that you spell your name correctly. Parents seem to view it as a matter of pride to give their children misspelt names, for example Rebekah Brooks. I can hardly resist the urge to aspirate heavily when reading out that name. Upon reading web sites which help parents to choose names, I have actually seen requests to others to suggest misspelling of names. The correct spelling is obviously far too boring and user friendly!
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@ Nosbort... Try re-reading my post again. I was describing a theoretical idea, not something that is current, therefore my statement is valid. @ electricblue... Yes, there are Northeners who are too lazy to look for a job, but this also applies to a percentage of Southeners as well. Take my brother and uncle. Both are being paid incapability benefits even though I know both are well and able to work. There is nothing wrong with them, yet they play the system so well that one of them actually has a Blue Badge. My aunt has made it her mission to find every loophole in our social structure so that she can exploit them. My own mother actually reported these cheats to the authorities, yet nothing came of her reports. Our authorities like to brag how they come down on benefits cheats, yet they are impotent. I mean, they cannot even protect young children who are known to be at risk, such as baby P, so how could they possibly stem the tide of the benefits cheats.
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There are parts of the UK where people can live extremely comfortably on £10K a year if they are in low rent or social housing. I don't doubt that the same would not apply to anyone with £20K a year in London or the South of the country. The generalisations of what constitutes 'poverty' are a nonsense, which neither politicians nor journalists seem keen to pick apart. I agree with nickpike's sentiments but not his conclusions. France as an economy is utterly screwed and repeating pension provision comparisons from a totally daft article does not help any arguments. Mexicans get a low percentage of a pittance and contend with crime, poor housing provision and poor healthcare. I am intimately aware of comparisons with the USA and in particular California. In the UK we have an infinitely better support network in every kind of social provision but similar issues that the genuinely needy are often unaware of what help is available to them while the astute, congenitally bone idle manage to find every penny they can claim. REGIONAL differences are far more relevant to discussions of pensions and benefits levels than any international ones. Those 'do-gooders' running the food banks also need to get a grip on reality. Recent publicity regarding a new initiative started in the obnoxiously self-pitying dump of Goldthorpe in South Yorkshire just about summed it up. If the pond life which constitute the majority of the residents of that town spent less time wallowing in misery and as much time looking for work as they did organising that disgusting show of 'solidarity' when Margaret Thatcher died, there would be no need for any kind of subsidised shops. The transport network in South Yorkshire is now amazing and there are plenty of jobs within a ten-mile radius of Goldthorpe - but it's much easier to make a career of complaining and then wait for your pension. In the South of the UK in particular, people travel hours to work every day and yet in other regions there is a mind-set happy to enjoy incredibly low housing costs, yet seeming unwilling to look for work beyond walking distance!
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29 December 2013