Think tank, Social Market Foundation (SMF), says that under-22s and lower-paid workers should be included in the scheme that automatically enrols employees into pension savings.
Currently, employees aged 22 and older are enrolled on a pension when they earn more than £10,000 a year. Employers contribute to this scheme.
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Social Market Foundations’ recent research found that workers from minority ethnic backgrounds were disproportionately missed out.
The study was supported by Which? And found that only 25% of workers from ethnic minorities have a workplace pension. This is below the national level of 38%.
Ethnic minorities were also found to be more sceptical than others about the importance of private pension savings. They were more likely to believe that the state pension would be enough for a secure retirement.
The SMF believe the scepticism in ethnic minorities will put “greater risk of hardship in old age as the state pension and their savings may turn out to be insufficient for their needs.”
One solution from the think tank SMF is to overhaul pension auto-enrolment rules to bring more workers into the workplace pension system. Ethnic minority workers are often left out of workplace pensions due to low wages.
The SMF also called out the financial services industry for not doing enough to build ethnic minorities’ trust in pensions and savings services.
The SMF has demanded that the government needs to speed up its plans for pension enrolment to start at the age of 18.
However, the government states it is planning to make these changes, when affordable. The debate will be discussed again if teenage workers state that they will take a cut to their pay for a workplace pension. This could currently be tough with the cost-of-living crisis.
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They have recommended reducing the age for auto-enrolment. The report is another reason for the government to deliver on the reduction in the age of eligibility for auto-enrolled pensions from 22 to 18.
They have also stated the earnings threshold for eligibility on the auto-enrolment needs to be looked at. The £10,000 auto-enrolment needs to be reviewed and lowered, probably to zero.
Recently Australia removed its “minimum earnings limit” on workplace pension savings.
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This change in pensions has not yet made its way to parliament. Although there have been numerous plead’s from the public to change the scheme.
If you are an employer and still want more information on pensions and what you need and have to contribute to, we can help.
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Employers Direct offers FREE HR Advice to businesses of all sizes, within any industry in the UK. Our qualified HR advisors are here to offer your business confidential, in-depth, actionable advice on any HR query or issue you may face.
We’re here to answer any questions you might have with expert ease.
The Social Market Foundation (SMF) is a non-partisan think tank. They conduct research and run events looking at a wide range of economic and social policy areas, focusing on economic prosperity, public services and consumer markets.
The minimum age for auto-enrolment on to a pension scheme is 22.
The minimum amount of pay an employee must earn to be auto-enrolled onto a pension scheme is £10,000.
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