How a lower pension enrolment point becomes a win for Universal Credit claimants

Rachel Reeves suggested last week that a Labour government would lower the automatic enrolment threshold by almost a half.  This would be a huge win for low paid workers claiming Universal Credit where the government would pay an immediate 65% cash subsidy to their contributions.  See the details in my blog at http://blog.cix.co.uk/gmorgan

Gareth your blog says: ‘It’s hard to see why anyone in this situation would not take advantage of what is in effect a 65% subsidy of their pension pot from the public purse.’ 

I suspect that many low paid workers would prefer to opt out of the workplace pension and keep the money in their pay packet rather than making their short term income and a long term (but still rather small) subsidy to their pension dependant on means testing and the vagaries of UC administration. 

I might suggest to Rachel Reeves that she considers a decent national minimum wage and a decent pension funded through national insurance contributions rather than this kind of tinkering. But I won’t hold my breath.

paulmoorhouse - 03 June 2014 11:58 AM

I suspect that many low paid workers would prefer to opt out of the workplace pension and keep the money in their pay packet rather than making their short term income and a long term (but still rather small) subsidy to their pension dependant on means testing and the vagaries of UC administration.

Undoubtedly there will be some.  Your quote from my blog does go on to say “for those who can afford the smaller drop in actual disposable income that increasing contributions brings”.

Given the single-tier pension will lift many off Guarantee Pension Credit (and abolish Savings PC) then the net gain may be much more than under current rules.

I don’t have a crystal ball but it would be foolish not to use the existing and proposed rules as a basis for advice.