Occupational Pensions

(asked on 28th February 2018) - View Source

Question to the Department for Work and Pensions:

To ask the Secretary of State for Work and Pensions, what estimate he has made of the effect of pensions auto-enrolment on the income of low-paid workers.


Answered by
Guy Opperman Portrait
Guy Opperman
Parliamentary Under-Secretary (Department for Transport)
This question was answered on 5th March 2018

Automatic enrolment has been a great success story with nearly 9.3 million workers enrolled into pensions saving. More than 1 million employers have met their automatic enrolment duties.

Pension saving involves a balance between spending needs today versus saving for tomorrow – our system enables people to save and get an employer contribution, in most cases with tax relief too, so as to build retirement provision for their future. And it’s a system that allows people to opt out if they so choose. And importantly, the earnings trigger –currently at £10,000 and which is kept under annual review– is set at a level at which it ‘pays to save’ for individuals.

The largest increase in participation has been among those for whom the policy was developed, including eligible low earners with some 63% of these workers in the private sector earning between £10,000 and £19,999 now saving into a workplace pension.

We want to build on this, and we are increasing the minimum contributions from the current 2% of qualifying earnings to 5% in April 2018 and 8% in April 2019 to improve the level of savings, and in our 2017 Review of automatic enrolment set out our ambition for reforms which together would increase a median earners’ private pension pot size at retirement by over 40 per cent and for lower earners by over 80 per cent.

We recognise the potential impact on low paid workers; but of the 10 million employees we expect to be newly saving or saving more by April 2018 as a result of automatic enrolment, many will not see a fall in their take home pay because the increase in contributions will be counter-balanced by increases to the personal tax allowance, any pay increases, and the national living wage.

Reticulating Splines