Low earners and workplace pension saving – a qualitative study

• Context
• The study
• Key findings
• Points to consider

Context

This research was commissioned to develop further 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 report will support ongoing policy development on Automatic Enrolment.

The study

The research comprised 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. Of the total, 30 were conducted face-to-face and 89 online, between December 2022 and May 2023, each lasting up to 60 minutes.

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.

The research was commissioned by the DWP and conducted by research company Kantar Public.

Key findings

Findings were in five key areas, as follows:

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.
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 .
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 .
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 .
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.

Points to consider

• Methodological strengths/weaknesses: The authors note that 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.
• Applicability: Applicable to government, policy makers and pension providers.
• Relevance: Highly relevant as people in the UK generally don’t save enough for retirement.
• Generalisability: As stated, the research is qualitative and specific to these groups.