Low paid workers set to be hit with poor pensions provisions
The trade union’s Pensions Scorecard report examined the membership, contribution rates and governance of workplace pensions across the UK, as well as the retirement incomes they generate, identifying trends and areas where improvement is most needed.
It focused on the defined contribution (DC) schemes into which most workers will be automatically enrolled over the next few years.
The report highlighted that public sector workers are more than twice as likely as private sector workers to be contributing to a workplace pension scheme, while those earning over £300 a week are twice as likely to be paying into a pension as those earning less than that a week.
The TUC says that this shows the importance of good quality schemes in securing high staff opt-in rates, says the TUC.
Brendan Barber, TUC General Secretary, said: “It is shocking that fewer than one in four people earning less than £300 a week are saving into a workplace pension scheme.
“Even those low-paid workers who are saving are more likely to have low employer and employee contribution rates that make it far harder to build an adequate pension pot when they retire.”
Low-paid workers who are saving into a workplace pension are also likely to have lower combined employer and employee contribution rates than better-off staff.
Nearly half of those earning less than £200 a week have total contribution rates of less than eight per cent, compared to less than a quarter of those earning more than £500 a week.
Barber continued: “Auto-enrolment will help reverse some of these worrying trends by getting more people to save. But we shouldn’t be under any illusion that it alone can deliver the level of income that most people expect when they retire.
“There are still too many low quality and poorly-governed schemes around which need to be policed more effectively. Further reforms are needed if we are to make more DC schemes fit to provide a decent income in retirement.”
The TUC is concerned that 1.9m employees earning between £5,720 and £9,205 (£9,205 is the proposed earnings trigger for people to be auto-enrolled into pensions from next April) will miss out on pension saving altogether.
A further 2.1m people earn less than £5,720 and have no legal right to access a workplace pension.
The TUC says that the vast majority of those missing out are women and part-time workers, who are amongst the least likely to have a pension and should therefore be a top priority for auto-enrolment, says the TUC.
The TUC wants the government to end restrictions on contributions into the National Employment Savings Trust (NEST) so that more people can save into a high quality, trust-based scheme.
It also thinks that the Pensions Regulator should also be given greater powers to police the governance of contract-based schemes – which currently falls under the remit of the Financial Services Authority (FSA).