10 million workers now auto enrolled but “put the champagne on ice” as 12 million still under-saving for retirement

  • 10 million workers in the UK have now been auto enrolled into a workplace pension scheme
  • Despite the success of auto enrolment, 12 million* are still under-saving for retirement
  • Minimum contributions will rise to 8% of earnings in April 2019 but, due to the qualifying earnings bands, no auto enrolled saver will really be putting away 8%
  • Lower earners and part-time workers, who are more likely to be women, lose out the most

Today the Department for Work and Pensions announced that since the introduction of automatic enrolment in 2012, 10 million people have been auto enrolled. Despite the success of the policy, using the savings adequacy measure introduced by the Pensions Commission, there are still around 12 million individuals under-saving for their retirement who make up 38% of the working age population.

Of these 12 million, the vast majority of those individuals who are under-saving – approaching 10.4 million (87%) – earn more than £25,000 a year.

Adrian Boulding Director of Policy at NOW: Pensions said: “Hitting 10 million auto enrolled is a huge milestone and with minimum contributions rising in April there’s a danger that the government will think that it’s job’s done. But, we should all put the champagne on ice because there’s 12 million people who are still under-saving for retirement and this has to be tackled.”

8% doesn’t mean 8%

One of the major causes of under-saving is the way auto enrolment minimum contributions are calculated with the first £6,032 of a person’s income not included in calculating their pension contribution. In April, when auto enrolment minimum contributions increase to 8% this will increase to the first £6,136.

For low earners, this means a significant proportion of their earnings won’t be counted towards their pension contributions. For example, from April 2019, if an employee earns £20,000 their qualifying earnings would only be £13,864. For somebody earning £10,000 only £3,864 of their earnings would be pensionable.

This affects all workers, but the low paid are particularly disadvantaged as the table below shows:

OccupationAverage salary based on ONS dataAnnual pension contribution based on qualifying earningsAnnual contribution on every pound of earnings
Cleaners £      14,164.00 £        642.24 £     1,133.12
Nursery Nurses £      14,305.00 £        653.52 £     1,144.40
Cooks £      15,461.00 £        746.00 £     1,236.88
Receptionists £      16,258.00 £        809.76 £     1,300.64
PA and Secretaries £      24,508.00 £     1,469.76 £     1,960.64
Bricklayers £      24,806.00 £     1,493.60 £     1,984.48
Vehicle Body Builders and Repairers £      24,821.00 £     1,494.80 £     1,985.68

Adrian Boulding said:
 “In the 2017 auto enrolment review, the government committed to changing the law so that auto enrolment calculations on every pound of earnings by the mid-2020s but this month they chose to increase the lower earnings band from £6,032 to £6,136. It’s almost as though they’ve found the right station but have got on a train going in the opposite direction.”

Notes to editors

Automatic Enrolment Review 2017: Maintaining the momentum

More information

Samantha Gould – NOW: Pensions
Email: pressoffice@nowpensions.com
Instinctif Partners
Email: nowpensions@instinctif.com
Fenella CuthbertCicero/AMO
Tel: 0207 947 5327