Around 4.8 million employed people are still ineligible for auto-enrolment and are not saving into a pension scheme, according to the Work and Pensions Select Committee (WPSC).
The WPSC’s report on auto-enrolment says that currently a quarter of the workforce are still excluded from auto-enrolment with the main reason being low pay. The committee warns that the levels of pension savings in this group (which is disproportionally made up of women, the disabled and minority ethnic) is likely to be low.
9 million people will be saving more into a pension due to the auto-enrolment scheme.
In contrast, the number of self-employed people saving into a pension has fallen, despite self-employment being at an all-time high. Individuals actively saving towards their retirement fell from 1.1 million to 0.5 million between 2001/2002 and 2012/2013.
The WPSC has put forward the lifetime ISA introduced in the March Budget 2016 as a viable option for individuals to secure their pension pots.
Lifetime ISAs are available for those aged under 40 from April 2017. Individuals can save up to £4,000 per year, on top of receiving a 25% government bonus. Savings can be withdrawn at any time to purchase a first home.
The Department of Work and Pensions (DWP) has however said that the lifetime ISA “could easily give many people the impression that it attracts a more favourable tax treatment than pension contributions.”