Nine million retiring with pensions worth less than £6,700

Almost 9m people in the UK remain significantly ‘under-pensioned’ compared to the broader population according to a new report from the Pensions Policy Institute and Now: Pensions.

The report found that these under-pensioned groups typically have annual private pension incomes ranging from £3,650 to £6,750. This is between 43 per cent and 80 per cent of the average pension income of £8,500, leaving many vulnerable to financial insecurity in retirement.

The report says the groups most at risk from retirement in poverty include carers, people from ethnic minority backgrounds, people with disabilities, women, divorced women, single mothers, self-employed people and those with multiple jobs.

Since 2012, auto enrolment has brought more than 11m additional people into a workplace pension scheme. However, many of those in these groups above do not meet the eligibility criteria for auto enrolment, missing out on the opportunity to save for their retirement.

To address this issue Now: Pensions is proposing five policy reforms:

1. Remove the £10,000 auto enrolment earnings trigger.
2. Scrap the lower earnings limit on pension contributions.
3. Introduce a family carer’s top-up.
4. Ensure pension savings are considered in divorce settlements.
5. Take greater action on childcare availability and costs.

PPI senior policy analyst John Adams, and author of the report, adds: “The rate of employment in the general population has fallen slightly since the previous report, and under pensioned groups such as carers, single mothers and divorced women are particularly affected. Changes to automatic enrolment criteria could make huge strides in pension saving, such as allowing the income from multiple jobs combined to count toward the earnings trigger or removing the earnings trigger entirely.” 

Now: Pensions chair of trustees Joanne Segars says: “Without further policy action, millions will continue to struggle to achieve a secure retirement. That’s why we’re suggesting key reforms, including removing the £10,000 auto enrolment earnings trigger, scrapping the lower earnings limit on pension contributions, and introducing a family carer’s top-up. These measures would help ensure that everyone, regardless of their working patterns or circumstances, has a fairer opportunity to build a financially secure future.”