Commenting on the Treasury Committee Household Finances report published today, Adrian Boulding, Director of Policy, NOW: Pensions said: “Despite the success of auto enrolment, the report highlights that 12 million people are still likely to be under-saving for their retirement.
“Getting people to save adequate amounts for their future can’t be left to chance and government need to set a clear direction.
“Removing the lower earnings band from the auto enrolment calculation and basing contributions on every pound of earnings is a step in the right direction. But, leaving minimum contributions at 8% would be to sell the policy, and savers, short.
“On paper, auto-escalation looks like a relatively painless way to encourage saving but, for employers, it creates huge administrative complexity.
“The only sure-fire way to reduce levels of under-saving is set a roadmap for increasing auto enrolment minimum contributions to adequate levels.”
Gender pensions gap
“The Committee is right to draw attention the pension savings gap between men and women.
“When we examined our own membership, the disparity is already apparent. Currently 25-year-old women have, on average, £197.05 saved versus £213.85 for men of the same age.
“If the £10,000 auto enrolment trigger was removed, 2.5 million women would become eligible for auto enrolment as women are more likely to be lower paid or work part time. But, this alone would not bridge the gap.
“Taking time out to care for children or elderly relatives has long term implications for pension saving. This is compensated for in the state pension through National Insurance Credits but there’s no equivalent for workplace pension savers.
“One solution to this would be for government to pay an auto enrolment credit to those eligible who are taking time out for caring.”