Written by Malcolm Small on Tuesday 15 April 2014
Late last month, the Pensions Regulator issued a “Registration Report” for the first time, which it will issue on a monthly basis going forward. This report details how many employers have registered with the Regulator as having completed the process of enrolment. Figures for the number of employees who have been enrolled, and those not enrolled because they are not eligible, are also provided. These figures were issued into the maelstrom of shock surrounding the Budget announcements, so perhaps were not studied as much as they might have been.
As we know, on the face of it, the automatic enrolment narrative is being portrayed as good news, with fewer than 10% of employees, and in many cases even fewer still, opting out of pension saving. Between July 2012 and the end of February 2014 no fewer than 10,503 employers took up their new duties, covering a workforce of 15,274,000. Tens of thousands more employers will stage during the course of this year. Of that number of employees, 7,782,000, or just over half, were already in a qualifying scheme at the staging date. 3,210,000 – just 41% of those already in a scheme – were newly automatically enrolled into pension saving. However, no less than 3,868,000 workers were not enrolled as they fell outside the eligibility criteria because of age limits or earnings levels. This is over a quarter of the total workforce covered. Add in the number opting out of pension saving and around one-third of the workforce, for whatever reason, are not making any provision for their future.
Why is this? It is starting to become clear that some people have a “portfolio” of low-paid, often part-time, jobs. In isolation, these will often fall below the minimum pay level for automatic enrolment. Together, they may often lift earnings well above this level – but there is no mechanism, and nor could one be reasonably devised in all probability, for identifying when this is the case. Others may genuinely be working only to provide “pocket money” to top up a main earner elsewhere.
But if the policy objective is to try to provide everyone with at least some assets to rely upon at retirement other than the basic state pension, and one third of workers appear not to be participating in this effort for whatever reason, we should surely be concerned. With the trivial commutation limit now at £30,000 it must be the case that it will pay everyone, no matter how modest an earner, to save. And if the long term goal is to reduce reliance on the state in retirement and increase individual provision at every level, this “gap” will surely ask some searching questions of the automatic enrolment policy design at the planned review in 2017