A thinktank has called for a better pension deal for young workers and people on lower pay.
The Social Market Foundation (SMF) argues that low earners and new entrants to the jobs market should be automatically enrolled into a pension scheme.
Under current arrangements, workers 22 years of age and above who earn more than £10,000 per annum are enrolled in a pension scheme unless they opt out. The automatic enrolment trigger is reviewed by the Secretary of State for Pensions each tax year. According to a report published in January, there will be no change to the existing threshold of £10,000 while the government has concerns about the ‘key balance that needs to be struck between affordability for employers and individuals, and the policy objective of giving those who are most able to save the opportunity to accrue a meaningful level of retirement savings.’
However, the SMF recommends employers pay contributions to staff pension pots from the first pound earned. Workers would only make a contribution once they earn more than £190 a week – the minimum amount required to meet the National Insurance threshold. The SMF also suggests that more research and analysis is compiled on this issue.
The SMF’s intervention reflects wider anxieties about the affordability of retirement. The results of a survey compiled by My Pension Expert revealed that a third of workers aged 55 or more say that the cost-of-living crunch has upended their plans to retire. Around 25 percent of respondents said that they will still be going to work in their 70s, while only a third of people have a financial plan to help them decide when they can retire.
The Workers Union Says
Enrolling people into a pension scheme as soon as they start earning is a move towards extra security in old age. But it is only the tip of a particularly deep iceberg. People on low pay (or those at the beginning of their working life) may not be able to afford the salary sacrifice. They may need every penny to keep a roof over their heads and put food on the table for their families.
The real issue, then, is how we transition low-paid jobs to jobs which yield better pay and benefits. That requires a shift in mindset from a society that divides work into ‘skilled’ and ‘non-skilled’ workers, to one that rewards workers well for a doing a job and treats everyone as valued members of the community.