Auto-enrolment Fails to Deliver Pensions for All

Nearly two million workers have already been left out of the new pensions initative according to The Pensions Regulator

Emma Wall 31 July, 2013 | 10:05AM
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The Government initiative to provide private pensions for all workers has already come unstuck, according to The Pensions Regulator. 

Auto-enrolment was launched last October starting with the country's largest companies and around 10 million people will eventually be enrolled into schemes over the next couple of years.

But of the 1,153 companies that have already initiated auto-enrolment, more workers have been left out of the scheme than opted in. 

One million workers have been enrolled, but 1.7 million have failed to qualify because they earn less than the minimum threshold, are too young - or are older than the state pension age. 

Laith Khalaf, Head of Corporate Research for Hargreaves Lansdown said automatic enrolment was a vitally important project, but it was not "a silver bullet".

He continued: "Millions of part-time workers are going to be overlooked because they don’t earn enough, likewise the self-employed are excluded. There is still therefore a pressing need to foster a savings culture alongside auto-enrolment, and to provide a decent level of state pension." 

Auto-enrolment was launched to boost the number of Britons saving into a pension and ensure they have enough cash in retirement to maintain a comfortable standard of living, as there are fears that in the future the state pension will not be sufficient. 

Under the new rules it is compulsory for all companies apart from the very smallest to offer their employees a pension scheme.

Those companies which do not wish to run their own scheme can outsource to a default scheme. The Government run default scheme is called Nest.

The minimum wage requirement for auto-enrolment is £9,440, which critics say penalises part time workers. 

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Emma Wall  is former Senior International Editor for Morningstar