Multi-jobbers-are-missing-out-on-retirement-income

Lower earning employees with multiple jobs could be missing out on £76 million a year in employer pension contributions due to an ‘unfair’ pension system.

A new study by insurer Scottish Widows has concluded that the current system places those lower earners with more than one job at a financial disadvantage.

More than four million people in the UK have more than one job.

The loss of employer pension contributions for multi-jobbers is the result of automatic enrolment thresholds for workplace pensions.

Regardless of total earnings, people are excluded from being automatically enrolled in a workplace pension where one job pays less than £10,000 a year.

Because the success of workplace pension auto-enrolment relies on people doing nothing, the lowest earners in society miss out on this ‘behavioural nudge’ if they are not automatically enrolled.

Scottish Widows found that 49% of people with multiple jobs earning under the threshold are not enrolled in their company pension as a result, compared with 23% across all employees.

It’s not the first time this issue with the automatic enrolment system has been highlighted. Still, the individual impact has worsened over time because the minimum contribution paid by employers for eligible employees increased from 2% to 3% in April 2019.

The economic impact of the Covid-19 pandemic could also worsen the financial implications of this situation, with 55% of multi-jobbers taking on additional jobs since the onset of the pandemic.

As a result, even more potential earnings are not being saved towards an income in retirement, with these missed contributions not benefiting from tax relief or being matched by employer contributions.

Pete Glancy, Retirement Expert at Scottish Widows, said:

“While auto-enrolment has been a game-changer for boosting the workplace pension pots of millions across the UK, those whose income comes from more than one job are losing out significantly relative to those with the same income from a single job.

“This was an issue that we first highlighted in 2018 based on research conducted at that time, and our latest research suggests that the problem is not going away.

“A shift towards more multi-jobbers will reverse some of the gains made by auto-enrolment, so the argument to remove the earnings threshold is getting stronger and should be a top priority for the next evolution of the scheme.”

It’s important to note that someone earning between £6,240 and £10,000 a year can choose to opt-in to their workplace pension, and their employer is then legally obliged to contribute 3%.

If you earn less than the £6,240 threshold in one job, you can still opt-in to the workplace pension, but your employer is not legally required to make pension contributions.

There seems to be a lack of awareness around these rules, with 48% of people earning between the bands being unaware of the option to opt-in and that their employer must contribute.

43% believe that all workers are automatically enrolled into a workplace pension scheme, regardless of their earnings.

The research also found that 5% of people with multiple jobs and at least one job paying less than the £10,000 threshold have been refused enrolment into their company pension scheme by their employer.

This finding suggests that some employers do not understand the rules or deliberately prevent access to a pension scheme, therefore breaking the law.