As auto-enrolment cranks into gear and millions of people take the first steps into retirement saving, my thoughts are given over to those workers who are not eligible for auto-enrolment.
There are around 3.5 million workers in the UK who will fall outside the scope of auto-enrolment due to age or low earnings, or both. However, until this week I did not realise that there are two very different types of workers who are not eligible for auto-enrolment.
The first is 'non-eligible job holders' who earn above the £5,564 a year qualifying earnings level for contributions but below the £8,105 a year auto-enrolment trigger salary.
To recap before anyone looking at these figures loses the will to live, you have to earn £8,105 a year to be auto-enrolled but when you pay your 1% contribution you don't pay it on your whole salary, just the earnings between £5,564 and £42,475 – known as qualifying earnings.
The second group of people who will not be auto-enrolled are 'entitled workers' who earn less than the qualifying earnings limit of £5,564.
One of the biggest differences between these two groups of people, other than salary, is that the non-eligible job holders are entitled to an employer contribution whereas the entitled workers are not.
Granted the entitled workers probably shouldn't bother saving seeing as they earn so little and don't benefit from any kind of other contribution. But the non-eligible job holders should be encouraged to take up the offer of their company pension scheme and opt in.
What sane person gives up the offer of free money, which is exactly what the employer is offering? Yes, they may not make mega bucks in the year but a modest amount of money saved away each month and boosted by an employer contributions could end up paying for a nice holiday in retirement.
We should be encouraging everyone, particularly those that benefit from employer contributions, to put something aside for their old age. I have always been taught that every penny counts when it comes to saving and no matter how low paid my job has been have always tried to squirrel away something.
Those who are not auto-enrolled should be reminded that the door to pension saving has not been closed on them, they just may need to knock a bit harder at the door before they are welcomed in to the fold.