Echoing Government data showing the biggest upswing in participation in auto-enrolment was amongst young savers, Scottish Widows’ 14th Retirement Report, which focuses on adequacy, found 39 per cent of UK workers aged 22-29 years old are now saving enough for a comfortable retirement, up from 30 per cent last year. But 21 per cent of young people are still saving nothing for later life, and a further 20 per cent are saving a lot less than the 12 per cent of their income recommended by the provider.
Figures published by the DWP yesterday show that the largest increase in auto-enrolment take-up was seen in the 22 to 29 age group, increasing from 24 per cent in 2012 to 77 per cent in 2017, a 53 percentage point rise.
The research also shows that nearly two million ‘multi-jobbers’ – people with more than one job – are missing out on over £90m a year in employer contributions because their income is being split across different employers, meaning they fall foul of minimum earnings threshold for enrolment.
Scottish Widows projections, using the latest ONS figures, show that 1,831,127 multi-jobbers have at least one job that earns under £10,000 and is not enrolled in the company’s pension scheme.
Savings levels have stagnated across the rest of the working population with the proportion of UK workers saving adequately for retirement dropping slightly for the first time since 2013, falling from 56 per cent in 2016 to 55 per cent last year.
Despite adequate savings rates having risen by 10 per cent since auto-enrolment was introduced in 2012, the stall in recent years demonstrates that a renewed effort is needed to improve the nation’s readiness for retirement says the provider.
The provider is calling for a raft of measures to address pension adequacy, including the lowering of the earnings threshold for auto-enrolment, reducing the minimum age for AE from 21 to 18 and continuing escalation beyond 8 per cent.
Scottish Widows retirement expert Robert Cochran says: “It’s encouraging that more young people are saving enough for a decent retirement and auto-enrolment has played a really important part. However, auto-enrolment was designed as a safety net for a country facing a pensions crisis. This year’s study shows some of the hardest working and most financially vulnerable members of society are slipping through the auto-enrolment net because of minimum earnings thresholds. This unfairly impacts multi-jobbers, who could be working the equivalent of full-time hours, yet without the financial benefit of having a single employer. Whilst the government has pledged to make changes that will help, a mid-2020s timetable seems a long way off for the millions of multi-jobbers today.”
“The fact that savings levels have stagnated for the last few years shows that auto-enrolment is not a silver bullet. It will be interesting to see if the step up in minimum contributions helps reverse this trend, but it doesn’t take away from the fact that the current threshold puts an unfair barrier in the way of low-paid workers and their ability to prepare adequately for retirement. We want to see it scrapped entirely at a much quicker rate than the Government has suggested, to let all workers benefit from employer contributions. It’s vital that every single person in the UK is prepared for the rising costs of retirement, and removing the threshold can help to do that.
“This evidence underscores our continued campaign to make pensions more inclusive for low earners. It’s a thorny issue but only by tackling it will the lowest paid segments of the workforce have a fair chance of kick-starting their later life savings with support from their employers.”