Figures show 6.3m employees are still without a workplace pension, despite the fact that the proportion of workers saving for retirement has hit an all-time high.
Latest figures from the Office of National Statistic show 77 per cent of employees now have workplace pensions. This compares to just 47 per cent of workers in 2012, when AE started to be rolled out.
However, despite these positive figures, the TUC has warned that millions of workers are still excluded because employers do not have to automatically enrol staff earning less than £10,000 a year, nor those under the age of 22.
AE rules also exclude the first £6,136 of pay when calculating the minimum contribution based on wages earned. The TUC says the combined effect of this means low-paid workers miss out on up to £300 of annual pension contributions from their employer.
The TUC adds that part-time workers are at particular risk of missing out. Just 58 per cent of part-time employees belong to a workplace pension, compared to 86 per cent for full-time workers.
As a result women are disproportionately affected, as they are three times more likely to be in part-time work.
The TUC calculate that workers generally need total contributions of at least 15 per cent of their wage to be sure of a decent income in retirement. As a result the union is calling on the government to remove the earnings limits, and to raise the minimum contribution required from employers.
TUC general secretary Frances O’Grady says: “Automatic enrolment has helped many more working people get pension contributions from their employer.
“But the current rules exclude lots of low-paid and young workers. And that’s why so many people still don’t have a workplace pension. It’s time the government ended this injustice. Pension schemes are a vital part of earnings. There should be a pension contribution in every pay packet.”
Others in the insurance industry backed these calls. Aviva points out that the average amount being saved in workplace pensions is “trending towards inadequate minimum levels”, at only around 8 per cent of pensionable earnings.
It points out that this problem is particularly acute in the private sector where only 10.6 per cent of employees are in defined benefit pensions, compared to 91.5 per cent in the public sector.
Aviva’s head of savings and retirement, Alistair McQueen says: “We must not let today’s headline figures convince us that our work is done.
“While a record number are saving in pensions, millions are still saving at inadequate levels, and many are missing out altogether – either because they are too young, low earners or self-employed.
“Recent Aviva research amongst UK workers aged 45-plus suggests 32 per cent believe they will not have enough money to retire when they choose, while 45 per cent are worried they will not have an adequate retirement income.”
To address this issue Aviva advisers employees to be saving around 12.5 per cent of their income each month into a pension, and suggests people should look to accumulate a fund of at least 10 times their salary before they retire.
It says this is more easily done if people start saving around 40 years before they hope to retire.