Pensions - Articles - AE still excludes the most vulnerable, says Portal Financial


Auto-enrolment is an undeniable success, but its eligibility criteria means that it continues to exclude those most in need, argues Portal Financial, one of the UK’s largest retirement specialists.

 To be automatically enrolled into a workplace pension scheme a person needs to be aged between 22 and the state retirement age and earn over £10,000 a year. The scheme also excludes the self-employed.

 Women are particularly affected, as they comprise nearly three-quarters of people in part-time work and 63% of people earning £7 per hour or less.[1] Women are more likely than men to be unpaid carers, balancing work around other responsibilities, and 76% do not believe they will have enough money for a financially comfortable retirement. On average, women already have lower incomes than men in retirement; by being excluded from auto-enrolment, this could continue for the foreseeable future.

 Jamie Smith-Thompson, managing director of Portal Financial, says: “Auto-enrolment seems to have been a great success, with over half of 22-29-year-olds now saving into a pension, and low opt-out rates across the board. But more needs to be done to include the people most at risk of insufficient income in retirement. It can be difficult to save when on low incomes, but a combination of employer contributions and tax relief can more than double the amount added by the employee, and with compound interest even small sums can really add up over the years.

 “It’s true that people can opt-in to auto-enrolment if they don’t meet all the criteria, such as not having a large enough salary, but we know from the low opt-out figures that most people are keen to stay in but needed a nudge to start saving into a pension.”
  

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