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Low Earners And Workplace Pension Saving - A Qualitative Study - Consider Having Employment Paying Over £10,000 To Ensure Pension Contributions

10th February 2024

A series of interviews with low earners exploring attitudes, behaviours, and experiences of workplace pensions in the UK.

Milo Warby, Alice, Coulter, Dr Lynne Robertson-Rose, and Sandra Hicks.

This report covers qualitative research, commissioned by the Department for Work and Pensions (DWP) and conducted by Kantar Public, with 119 low earners, exploring their attitudes, behaviours and experiences of Automatic Enrolment (AE) and workplace pensions.  

This research contributes to a better understanding of low earners' attitudes, behaviours, and experiences with workplace pensions, while considering the various groups within the lower earning category. The research outlines the individual, social and material factors that impact low earners and explores their reactions to potential changes to the AE framework. 

The findings in this report cover the following areas:

factors influencing low-earners' behaviour and attitudes towards pensions, including individual, social and material factors

differences in attitudes, behaviours and experiences of pension saving and later life planning between employees whose earnings are above/below the £10,000 trigger and who are/are not enrolled in a workplace pension scheme

responses from low earners to hypothetical future changes to AE requirements for workplace pension schemes

Lowering the earnings trigger would require employers to automatically enrol more eligible workers into their workplace pension scheme. This would lead to more workers benefitting from their employer's contribution as they save into a workplace pension.

However, the trigger must also protect those who cannot afford to save, ensuring AE works for those for whom it "pays to save" and ensuring employers are able to comply and keep confidence in workplace pensions high.

The current earnings trigger acts as a barrier to part-time workers and seasonal workers from participating in workplace retirement saving. Removing or drastically reducing the earnings trigger is likely to ‘catch' more multiple jobholders.

Multiple job holders are employees that could have one or more jobs that earn above or under £10,000 per annum. Those who are earning below £10,000 per annum in one employment means they are not guaranteed to be automatically enrolled on all their earnings, risking them saving less into a private pension than an employee with the same overall earnings from a single job.

Wider pension scheme participation would go some way to addressing inequalities that remain in workplace pension saving, for example the lower number of female employees who are eligible to be auto enrolled.

However, the challenge is that lowering the earnings trigger risks may increase the financial strain on potentially already financially vulnerable individuals.

The report provided a series of policy aims or recommendations for further work:

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 may help promote pension saving in this context,
overcome barriers, and identify opportunities for support
examining non-compliant employer behaviours could help encourage participation and tackle the misconceptions these promote

the option of employer/employee matched contributions merits review given its broad appeal to the low earner audience

Research Context
While the Department strives to ensure appropriate coverage of AE and help those with lower earnings to build up pension savings, it wants to ensure feasible AE thresholds and manageable contribution rates for those on lower incomes. This research was commissioned to develop our understanding of perceptions and experiences of Automatic Enrolment (AE) into workplace pensions and later life planning amongst employees categorised as ‘low earners’ (earning between £5,000 and £19,000). Specifically, the research sought to provide clarity around the merits of altering the current earnings threshold of £10,000 that triggers enrolment into a workplace pension. The report provides evidence to inform the development of effective measures to help low earners build up pension savings. The focus of these measures is on expanding the coverage of AE and ensuring contribution rates are set at an appropriate level, which will provide adequate retirement funds while not overburdening low-earners.

The findings are a valuable addition to the Department’s evidence base and support the ongoing policy development on Automatic Enrolment. This research complements insights from other recent DWP research, for example on Engaging with Pensions at Timely Moments or the employer perspective on workplace pensions.  

Key Findings
1. Attitudes, behaviours, and experiences of low earners:

saving into a workplace pension was generally considered desirable and important for future security
low earners exhibited diverse characteristics, including by age, single or dual household incomes, and level of financial vulnerability, confidence and trust in pensions. These factors, particularly age, had a greater influence on pension attitudes and the appeal of alternative pension scenarios than current earnings or pension participation
passive drivers of pension saving, such as lack of awareness of opt-in/opt-out rights, legacy enrolment, and auto-enrolment, were prevalent among participants
misconceptions from individuals that their benefit entitlement might be reduced or disappear if they started saving into a pension led some who were eligible to decide against doing so
2. Factors influencing opt-in decisions for earners below the trigger:

social and material factors, including employers’ own approaches, workplace norms, and pension infrastructure, had a stronger influence on pension saving behaviour than individuals’ characteristics and attitudes
within the sample, active pension saving was more prevalent among those who prioritised saving in general or felt financially secure at a household level
3. Factors influencing opt-out decisions for earners above the trigger:

reasons for opting out included a perceived need to prioritise short-term budgeting due to rising costs of living, or financial shocks and other life events
this decision was also observed among younger people in temporary roles with variable hours who felt more financially vulnerable, that pension saving was not yet relevant, or prioritised alternative investments
4. Impact of proposed higher or lower contribution rates on low earners’ pension saving behaviour:

participants 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
matched employer/employee pension contributions were more appealing and ‘fairer’ than higher employee contributions, especially among non-savers
5. Flexibilities within AE to encourage greater participation:

lowering the trigger and offering flexibility to opt down or up contribution levels were likely to encourage participation due to passive pension behaviour
while initially appealing, a more flexible opt-up/opt-down/opt-out scheme was seen as potentially burdensome and confusing

Kantar Public conducted 119 in-depth interviews with low earners (defined as employees earning between £5,000 and £19,000). Interviews were conducted either face-to-face in participants’ homes, or through video links according to participants’ preference and to efficiently cover a range of UK locations. Thirty were conducted face-to-face and 89 online. Interviews took place between December 2022 and May 2023 and lasted up to 60 minutes. Due to the nature of the research and qualitative methodology, though exploring the range of opinions of participants had and key reasons underlying their views, the findings are not generalisable to the general population. Any use or interpretation should bear this in mind.

Participants were purposively sampled to achieve a spread across four groups to get an understanding of those saving/not saving into a workplace pension and earning above/below the AE earnings trigger with earnings either between £5,000 and £9,999 or between £10,000 and £19,000.

Participants were recruited using a combination of survey recontact sample drawn from the 2020/2021 and 2019/2020 Family Resources Survey (FRS) dataset, and via free-find recruitment.

As is standard practice in qualitative research, participants were given a £40 voucher to thank them for sharing their time to contribute to this study.

Findings Explained
1. Participants typically described a lack of knowledge about their workplace pension, poor engagement from their employers with WPP requirements and a lack of information. This potentially links to type of employment contract and employer size. Some participants described a feeling of loyalty towards smaller employers that had employed them for a long time. Research could be conducted with employees of smaller and micro employers, to understand how to better support these businesses to engage their staff in pensions. This would include exploring lower enrolment rates among those employed by these types of organisations, and the role of workplace norms and pension infrastructure.

2. Participants described a lack of motivation to save into a pension. This is in parts caused by the complexity of the pension system, a lack of understanding, and the need to look across multiple pension pots. The government’s ambition to launch pension dashboards will enable potential research to look closer into the impact of dashboards on savings outcomes.

3. This research focussed on participants on low income, some of whom were in receipt of Universal Credit. Although not a research objective, the interviews indicated widespread confusion about the interaction between benefits and pension saving. Further exploring the experiences of pension saving, specifically amongst those receiving working age benefits (e.g., Universal Credit) may benefit the development of clearer communication and guidance.

4. Some participants who were not saving into a workplace pension decided to use other means of saving and investment, such as property, crypto-currencies and other financial products. Some participants described their cultural identity being an important factor when deciding to save. Investigating cultural determinants of pension saving could enable a more informed approach to supporting more people of diverse backgrounds to save for a secure retirement.

5. This research has identified multiple areas where participants showed a lack of clear understanding or discussed their uncertainty leading to fear. These include the State Pension, tax relief, and other considerations when receiving benefits. Research into particular areas of pensions where knowledge appears to be particularly lacking, could complement DWP research ‘Engaging with pensions at timely moments’ about when people are likely to engage with pensions.