People from underpensioned groups have private pension wealth up to 85 per cent smaller than the UK average as some reach retirement with a private pension income of just £2,850, research has found.
The research by NOW: Pensions found that many will struggle to achieve incomes above the minimum PLSA retirement living standard of £10,900 for a single person, with women, ethnic minorities, people with disabilities, carers, single mothers, the self-employed, and those with multiple jobs at most risk.
The Underpensioned Index 2022 data, created in collaboration with the Pension Policy Institute (PPI), found that in order for women to retire at age 65 with the same income as men they would need to start working from the age of four.
It also found that women make up 79 per cent of this country’s underpensioned group, with the UK having the fifth highest gender pension gap amongst European OECD countries.
With the ongoing cost of living crisis once again highlighting the link between financial worries and in-work performance, Charles Cotton, senior reward advisor at the CIPD, explained HR needs to take a greater interest in underpensioned workers.
He said: “[HR] should review who’s contributing and what they’re contributing. Then explore why this is the case and what steps the workplace can take to solve this problem, such as by offering contribution matching or investing in pension communications”.
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Cotton added the pensions problem isn’t simply about saving, saying “employers should explore how they can sustainably boost wage rates; provide in-work progression opportunities; as well as providing benefits that cut the cost of living.”
The report highlighted that a Pensions Extension Bill is currently making its way through parliament, and will seek to lower both the enrolment age and automatic earnings (AE) threshold for pensions.
The report concluded that lowering the AE threshold and collecting pension contributions from the first £1 could generate an extra £1.2billion of contributions.
However, Lora Murphy, editor at the Chartered Institute of Payroll Professionals (CIPP), highlighted the fact not everyone must be auto-enrolled into a pension and said there are "other things" employers can do.
“Being proactive in highlighting the range of benefits open to them, or directing staff to free resources available to help with financial well-being such as the Money and Pensions Service website, could help those needing extra support,” she suggested.