The low earning population covers a range of demographics. It can include young people who may be juggling education and a job, or those who may be struggling with balancing work and childcare. It can also include those who have enough money to only need to work a few hours a week, therefore the circumstances low earners can be very different.
This report explores how the £10k trigger earnings within automatic enrolment into pension schemes affects these groups. This is the rule that specifies that an employee needs to be earning over £10k for their employer to be obliged to automatically enrol them in a pension scheme. The removal of this rule could help some people to save for their retirement, while putting others at risk of getting into more financial difficulties. Using data from Understanding Society, which covers a wide range of themes linking to earnings, such as family life, education, employment etc., this study can classify the low earners into further subpopulation to understand who and why they are classed as low earners.
By highlighting the key drivers of low earners, compared to the population of all earners, the researchers found that around 67% of low earners are women, with most falling between the ages of 16-22 and 59-62.
To understand how different groups of low earners would be affected by the auto-enrolment into pensions, it is necessary to understand the different motivations, circumstances and outlooks of the low earning population. Some may be low earners out of choice, safe in the knowledge that they have savings or higher earning family members to support them. Some may have a worrying financial situation, and need all the money they can get in working life. Some low earners may have earned a lot in the past or may expect to earn more in the future; some may be low earners their whole lives.
Research shows that removing the trigger point on earnings from automatic enrolment could bring increased retirement benefit to large sections of the low earning population, while worsening the circumstances of approximately 300,000 people during working life. This highlights the importance of this research, as it shows policy changes can have varied outcomes depending on the targeted group, and may bring more harm than good if not properly evaluated.
Read the full report: https://www.pensionspolicyinstitute.org.uk/media/0znckti2/20230802-technical-report-should-low-earners-be-encouraged-to-save-final.pdf
Income and expenditure
