Auto enrolment has been considered a success almost across the board since its introduction in 2012. Figures so far indicate that 90% of those people auto enrolled so far have chosen to remain in their workplace scheme which has provided a huge increase in the number of people saving for their retirement. It also represents a bigger success than similar schemes around the world, which have not seen such an enthusiastic take up. However, a new study from the PPI (the Pensions Policy Institute) has indicated that not everyone has the same access to auto enrolment.
How auto enrolment works
To understand how some groups may be missing out on being auto enrolled into a company pension scheme, it is important to understand the auto enrolment system. Basically, anyone over 22 and earning at least £10,000 per year will have a slice of their pay packet automatically taken and put into a pension pot which they can then access from the age of 55. As well as this, employers are obliged to pay into their employee’s pension pot and the government also offer tax relief. To stay in the scheme, the employee has to do nothing. To leave, they simply have to opt out.
Not everyone is experiencing the benefits of auto enrolment
Auto enrolment on the face of it seems very simple and straightforward and in some ways it is. However, due to how it is set up, the Pensions Policy Institute has identified certain groups who will not have full, fair and equal access to workplace pensions under auto enrolment qualification criteria.
- Women: In the report, it was found that 32% of women employed were ineligible compared to just 16% of men.
- The disabled: 30% of workers who have a disability did not meet the criteria for auto enrolment.
- Carers: 81% did not qualify due to not earning over £10,000 per year
- Service sector workers: Service sector workers: Only 55% of people employed in restaurants, hotels and shops were eligible for auto enrolment, compared to 90% in other sectors. Only 55% of people employed in restaurants, hotels and shops were eligible for auto enrolment, compared to 90% in other sectors.
The way forward?
Policymakers need to make this a priority because as well as being unfair on the groups mentioned above, it also has an impact upon the government's coffers, as those groups are going to find it much more difficult to save for a comfortable retirement and may end up being in receipt of welfare benefits in retirement. By making auto enrolment inclusive to all, including women, the disabled and those in the service sectors, we could then look at its introduction as being an outstanding success.