Best chance of a pension is having a degree or working in the public sector
Low paid workers, self-employed and women lose out on pensions
Auto-enrolment will help but concerns remain about lowest paid and the young
by Dr. Ros Altmann
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Huge differences in pension coverage: The ONS has just released interesting statistics which expose the poor pension coverage for low paid workers and those without qualifications. The figures relate to years 201-2012, so they do not reflect the spread of auto-enrolment, but they nevertheless have some interesting findings. The groups most likely to have pensions are public sector workers and university graduates, while pension coverage for private sector workers or the self- employed, people without qualifications, care workers, call centre staff or in manual labour are much less likely to have a pension.
Far fewer women than men have pensions, unless they are graduates: Across occupations and all age ranges, men are more likely to have pensions then women, although there is very little gender difference for graduates.
Public sector are in privileged position relative to private sector workers: The occupational differences are enormous – with more than 90% of those working in Public administration, defence or social security belonging to a pension, while only 5% of those in service industries like food or accommodation paying in.
Less than 10% of under 25s have a pension: The youngest workers are least likely to be covered by pension savings – only around 10% of people aged 16-24 have a pension yet). Many will not be earning yet, but even those who do may need to repay student debts or prefer to save for a house if they can, rather than contributing to a pension. This may be the right choice for them however the employer contribution is only available for pensions, not other forms of saving. It will be interesting to see how pension coverage changes once auto-enrolment spreads further in coming years.
State pension reform and increased pension flexibility enhances attraction of private pensions: As the state pension will entail much less means-testing and there will be more freedom and flexibility for pension savers, the attraction of private pensions has increased significantly and almost everyone would be better off in later life if they can save in a pension scheme. It will be in the interests of low-paid workers to try to join their company pension scheme if they can.
Auto-enrolment will help, but won’t cover lower paid or self-employed: Obviously, the auto-enrolment programme will radically change some of this and by 2017 all employers will need to provide pensions for their staff. However, the lowest paid (those earning below the income tax threshold of around £10,500 a year) and the self-employed are excluded, so they may continue to be left out of pension coverage and have to rely on other resources of the state.
Policymakers should watch carefully to see if any changes are required to improve later life incomes for the groups left out of pension coverage.