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The option of matching employee contributions by the employer “merits review given its broad appeal to the low earner audience”, a study into the attitudes, experiences and behaviours among low earners has found.
A study among 119 low earners for the Department for Work and Pensions by Kantar Public explored what influences their behaviour and attitudes around workplace pensions, and how they responded to hypothetical future changes.
It found that “matched employer/employee pension contributions were more appealing and ‘fairer’ than higher employee contributions, especially among non-savers".
Minimum auto-enrolment contributions are currently 8% in total, split into 3% employer contribution and 5% employee contribution. Pension organisations would like this to rise to 12% and crucially, to be split evenly between employees and employer.
Overall, the study authors also found that employers’ own approaches, workplace norms, and pension infrastructure had a stronger influence on pension saving behaviour than individuals’ characteristics and attitudes.
In addition to the split between contributions, they considered the hypothetical option of lowering the £10,000 earnings trigger from a single job to qualify for auto-enrolment. Some in the industry would like to see a lower or no threshold for enrolment, since it excludes low earners – predominantly women – from pension saving. Government, however, has warned against making people save for whom it might not ‘pay’ to do so, in other words, whose state pension will be sufficient in terms of replacing their working age income, and who might become more financially vulnerable by having their take-home pay reduced through saving automatically.
The study showed that the participants, who earn between £5,000 and £19,000, generally had more negative or neutral views towards a higher earnings trigger compared to a lower one.
“There was a reluctance among all current pension savers to miss out on the opportunity to contribute to a pension,” it noted.
For 2024-25, the DWP has decided to keep the auto-enrolment trigger at £10,000, reducing it in real terms and putting it below the personal allowance on income tax of £12,570. It has also kept the lower earnings threshold, which is expected to be abolished, at £6,240.
Other findings of the study include that low earners were worried about the impact on benefit entitlement from contributing to a pension.
The authors recommended:
targeting common misconceptions such as the interaction between pensions and benefits, may help address why some low earners have decided not to save into a pension;
improved understanding of attitudes within smaller and micro employers to help promote pension saving in this context, overcome barriers, and identify opportunities for support;
examining non-compliant employer behaviours to help encourage participation and tackle the misconceptions these promote; and
reviewing the option of employer/employee matched contributions
