Matthew 26.11

This blog asks questions about how best to deal with genuine poverty. The financial services answer has been  “financial empowerment” , saving our way out of debt. It is a flawed idea, ask those just getting by. Here are my 10 reasons why we should not enrol those earning less than £10,000 per annum,

1. If you earn £10,000 and don’t have any other earnings, you spend a lot of time applying for benefits and visiting food banks. You should not find yourself in debt because you auto-enrolled into a pension
2. It is a lot harder to opt-out of a workplace pension when you are short of financial  confidence and in need of the job.
3. If you earn below £10,000, you should be entitled to an employer contribution from £1 of your earnings but you are not. This from the DWP
   

   If your income is low

   Your employer does not have to contribute to your pension if you earn these amounts or less:

   • £520 a month
   • £120 a week
   • £480 over 4 weeks
4. If you earn less than £10,000 , you only get a taxman’s incentive (worth 25% of your contribution)if you happen to be in a  scheme operating relief at source (most schemes don’t)
5. If you earn less than £10,000 and you don’t have a complete State Pension contribution record, you are probably in line for pension credit – an AE pot could knock that on the head.
6. If you learn less than £10,000, you are likely to have lots of small pots, being eaten away by fixed charges
7. Workplace pensions would rather stick needles in their eyes than take on a load of small pots that will never wash their face. (probably why the PLSA are highlighting the risks of removing the lower earnings limit)
8. Even if you are unlucky enough to be a lifetime low-earner – auto-enrolment won’t make that much difference. These are the PPI”s numbers – it’s the state pension and benefits that matter to the poor.
9. Those on low earnings often have incomplete national insurance records and might well be better buying years (especially discounted years) of state pension credits
10. “Further research on low earners, the needs of under-pensioned workers, and the intersectionality of different characteristics are needed”  (Nigel Peaple -PLSA)

In my opinion , the best thing any Government should do for the genuine poor is support them properly with benefits.

The low earners used to be called “entitled”, which meant they were entitled to opt in to a workplace pension but they weren’t entitled to a contribution. That should change. If auto-enrolment is extended to cover earnings from £1 (taking away the contribution threshold) then low earners should be entitled to an employer’s contribution if they opt in (as those under 22 are).

The PLSA has asked

Can low earners be safely auto-enrolled in workplace pensions?

The answer is no. The 300,000 low earners the PPI reckon can’t afford to be “in” are often too vulnerable to get “out”. We must get out of the mindset that says that everyone should be saving, a great chunk of our population need to just get by.