More than a million of us left behind by the pensions revolution already

More than a million people are missing out on the benefits of workplace pensions.

It has always been the position of everyone at Lovemoney that workplace pensions, also known as auto-enrolment, are unquestionably a good thing.
As a nation we don't save anywhere near enough for retirement, so compelling employers to place workers into pension schemes and contribute to a pension pot, alongside contributions from the workers themselves, is an excellent way to change that.

And the fears that people would choose to opt-out once they realised a chunk of their salary was disappearing each month don't seem to be coming to fruition. A number of firms, as well as the pensions minister, have reported opt-out rates of less than 10%.

However, while many workers are now auto-enrolled, a far larger number are being left behind.

The workers who aren't being auto-enrolled
Figures from the Pensions Regulator show that one million workers, employed by 1,153 of our biggest companies, have been auto-enrolled into pension schemes so far. But 1.7 million employees of those same companies have been left behind as they don't qualify.

This may be for one of three reasons. Firstly, they may be over state pension age, in which case it's too late for auto enrolment to make much difference. Or they may be under 22, the minimum age for workplace pensions.

The third group excluded are those earning less than £9,400, the minimum salary threshold.

Investment provider Hargreaves Lansdown has expressed particular concern about this group, suggesting that part-time workers – who are the ones falling below that salary threshold – will get left behind, leaving them with insufficient pension pots when the time comes.

It's not like they can't actually get involved either – so long as you earn over £5,668, you can opt in. But the responsibility is yours, unlike those earning over £9,400, who can rely on their employer to do the work for them.
Why this is a problem
The majority of part-time workers are women, who already don't tend to save enough for retirement. Letting them slip through the cracks of auto-enrolment could cause serious problems.

Of course, part-time workers come in different shapes and sizes. While some work part-time out of necessity, sometimes taking on a number of different part-time jobs at once, others choose to do so as they can afford to. This latter group is perhaps not such a concern – they may be able to rely on the pension of their partner in later years anyway, combined with their own State Pension entitlements.

But there are plenty of part-time workers who need every penny of help they can get, and need to be encouraged to join in with auto-enrolment.

Left behind before they've even begun
There's another group of employees that also concern me when it comes to workplace pensions – those who work for small companies.

Maybe that's because I am one. But the phased introduction of workplace pensions – where the largest employers are the first to have to take part, followed by medium sized employers, and so on – means that millions of workers are missing out on valuable contributions to their pension pot, simply because of who they work for.

If you work for a company with fewer than 30 employees, the start date for your auto-enrolment can vary between June 2015 and April 2017, depending on your employer's PAYE reference number.

That's almost four years away. And a gap like that can make a massive difference to your final pension pot.

To see when different-sized employers are required to begin auto-enrolment, check out the Pensions Regulator's website.

I understand why workplace pensions are being phased in this way – it's easier to do things in stages like this, rather than everyone all at once. And starting with the bigger firms makes sense. After all, that way you get more people involved as early as possible. But it's still hugely disappointing that, with the system seemingly working fine at the moment, some workers will have to wait such a long time before they benefit.

What do you think? Is it a concern that so many people are still excluded from workplace pensions? Do you plan to opt out? Let us know your thoughts in the Comments box below.

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More than a million of us left behind by the pensions revolution already

If, like many Britons, you have failed to save the cash you need to maintain a comfortable standard of living in retirement, one option is to sell your home and downsize to a smaller property, using the money leftover to cover your living costs.
If moving out of the family home is too much of a wrench, however, the good news is that equity release schemes allow you to stay in your house or flat while still using the equity built up in it to provide some extra cash. The downside of the schemes, which work a bit like mortgages, is that you may not have much left to pass on to any children or other relatives.
But that's a small price to pay for a reasonable standard of living. For more information, try Age UK on 0800 169 6565.

Choosing the right annuity can have a significant impact on your retirement income. And as with most pensions, you automatically have what's called an 'open-market option' (OMO), you can scour the market for the highest annuity rate.
It is worth checking what your pension provider is offering first, though, as some companies offer guaranteed rates for existing customers that are likely to beat those available elsewhere. The Pensions Advisory Service on 0300 123 1047 is a good place to get some free advice.

On retirement, most people convert their pension fund into a guaranteed income annuity that pays out the same amount every month for the rest of their lives.
However, you can also choose an increasing annuity that pays out smaller amounts in the first few years but offers larger payments further down the line. This may prove a wise move if the rate of inflation remains at over 2%.

It is now easier to work later in life because the "default retirement age" has been scrapped.
People approaching retirement age and worrying about money can therefore choose to work for a few years longer - potentially transforming their financial situation. Other than the extra income from working, these people can look forward to higher state pensions, and higher annuity rates due to their greater age.
They can also benefit from bigger tax allowances and the fact that they no longer have to pay National Insurance contributions. Check out this nidirect website for more details.

You could get a much better rate with an impaired-life annuity if you have a medical condition that is likely to reduce your life expectancy.
Incredibly, even snoring, which is a common symptom of Sleep Apnoea could have an impact.
According to figures from MGM Advantage, a man with this condition could receive an extra £12,000 retirement income over the course of their retirement - or £571.44 extra money each year. Click here to find out more.

To maximise your retirement income, it is vital to ensure that you are receiving all the benefits to which you are entitled. These include the basic State Pension, and in some cases, the additional State Pension.
If you are on a low income, you could also qualify for the guaranteed element of Pension Credit, while those with some savings may get the savings element of this benefit. For more information about these and other benefits such as the Winter Fuel Payment, click here.

Many older couples rely on the pension income of one person - often the man. Should that person die first, the other person can therefore be left in a difficult position financially.
One way to prevent financial hardship for the surviving person is to take out a joint life annuity that will continue to pay out up to 67% of the original payments to the surviving partner should one of them die.
The disadvantage of this approach, however, is that the rate you receive will be lower. Again, the Pensions Advisory Service on 0845 601 2923 is a useful first port of call if you are unsure what to do.

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