Millions of workers juggling more than one job missing out on £90million in pension contributions due to unfair rule
MILLIONS of workers juggling more than one job are missing out on £90million in pension contributions, according to a new report.
Under current rules, if you earn more than £10,000 a year your employer automatically enrolls you into a workplace pension.
But the "earnings threshold" only applies to a single employer, meaning people working for multiple employers often miss out.
Now research from Scottish Widows revealed that almost 2million "multi-jobbers" across the UK have at least one job paying less than £10,000.
This means they could be working the equivalent of full-time hours, without having access to a workplace pension and miss out on the opportunity to save for retirement.
Scottish Widows estimates that collectively over £90 million of employer contributions a year could be claimed if the auto-enrolment minimum threshold was scrapped.
What is pension auto-enrolment and how does it work?
HERE's what you need to know
- What is pension auto-enrolment? Since October 2012, employers have had to enrol their staff into workplace pensionschemes as part of a government initiative to get people to save more for retirement.
- When does auto-enrolment apply? You will be automatically enrolled into your work's pension scheme if you meet the following criteria:
- You aren't already in a qualifying workplace scheme.
- You are aged at least 22.
- You are below state pension age.
- You earn more than £10,000 a year in 2018/19.
-You work in the UK. - How much do I contribute? There are minimum contributions that you and your employer must pay.
Minimum contributions are being gradually increased over time.
Your minimum contribution applies to anything you earn over £6,032 up to a limit of £46,350 (in the tax year 2018/19). This includes overtime and bonus payments. - What if I have more than one job? For people with more than one job, each job is treated separately for automatic enrolment purposes. You can still opt out of individual schemes if you want.
Each of your employers will check whether you’re eligible to join their pension scheme. If you are, then you’ll be automatically enrolled in that employer’s workplace pension scheme.
Robert Cochran, a retirement expert at Scottish Widows, said: "This year's study shows some of the hardest working and most financially vulnerable members of society are slipping through the auto-enrolment net because of minimum earnings thresholds.
"This unfairly impacts multi-jobbers, who could be working the equivalent of full-time hours, yet without the financial benefit of having a single employer."
Scottish Windows' research is based on a survey of more than 5,100 people and Office for National Statistics (ONS) labour market figures.
Automatic enrolment started in 2012, to head off fears of a looming old age savings crisis.
Employees taking part get the benefit of pension contributions from their employer. Workers can choose to opt out of the scheme.
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Government figures show over 9.6 million workers have been automatically enrolled and over 1.2 million employers have met their automatic enrolment duties so far.
The Government has been reviewing various ways to build on the initial success of automatic enrolment.
A Department for Work and Pensions (DWP) spokesman said: "Automatic enrolment has helped more than 9.6 million people enrol into a workplace pension, and our review set out the ambition to build on its success.
"By removing the lower earnings limit - making every pound pensionable - we will increase contributions and incentives for lower earners and people with multiple jobs to opt in, benefiting from an employer contribution and tax relief."
In April, the minimum amount that is automatically taken from your earnings for your pension increased from one per cent to three per cent.
NEST EGG What is pension auto-enrolment? What are the contributions, can I opt out and does my employer pay in?
At the same time, employer minimum contributions have risen from one per cent to two per cent.
Pensions are complicated to get your head around, with one in five working Brits facing retirement poverty because they have failed to save.
The national state pension age is set to rise to 68 by 2037 - here's all you need to know about saving.
How much do you need for a comfortable retirement?
YOU know you need to save for your pension but how much should you be putting away?
How much you need to save depends on a whole host of factors, including whether you're married, if you have a mortgage and how comfortable you want to be.
As a rough guide though, pensions expert at Hargreaves Lansdown, Tom McPhail, says you need to be typically putting away 12 per cent of your income into your pension - and starting as early as you can makes a big difference to how much you get.
A 32-year-old earning £28,000 a year and saving 12 per cent of that could expect a pot of £136,000 if they retire at 67, which would work out at around £6,100 a year in income - not including your state pension.
But if you were to delay saving until you were 35, your pot would drop to £122,000 and your income would reduce to £5,590 - a difference of £510 a year.
If you were to wait until 40 it would be even worse - with your pot now worth £101,000 and just £4,960 a year - not much to live off for your hopefully long retirement.
To get an accurate forecast of how much you need to save for your future, there are a number of calculators available online, which can help.
, , and , all have free services you can use.
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