How can low earners afford a commensurate retirement income?

This project will explore pension saving and retirement outcomes for individuals who experience low earnings during working ages.

Why this project is important

Living standards at working ages and in retirement are inextricably linked. Even though low earners are more likely to continue to work until State Pension age, they are less likely to be able to put savings aside for their retirement and are more likely to have their ability to work impacted by poor health.

Yet the experiences of low earning, working age households are heterogeneous, and different groups will have different labour market experiences related to age, gender, ethnicity, whether they are disabled and / or a carer, education etc. Understanding the complexities of low earning groups is crucial for developing effective policy interventions.

The research will consider:

• What are the representative life-courses of those who experience low-earnings over working ages?
• What are the workplace pension saving behaviours associated with these groups?
• How do these savings lead to retirement incomes that are commensurate with their working life experience?
• How would alternative approaches to saving for retirement, and/or saving for a house purchase, impact retirement outcomes and working age affordability?

What it will involve

The research will involve:

1. A literature review of publications, academic and policy-focused, considering the work to date and key indicators of low-earning groups.
2. Using Understanding Society data and machine learning techniques to analyse working age trajectories of households who experience individual low-earnings and relative low household incomes.
3. Analysis of workplace pension contribution data for low earners drawing on data from the Annual Survey of Hours and Earnings.
4. Modelling retirement income for low-earning households, using the PPI’s Individual Model and the OBR’s Economic Outlook.
5. Analysis of alternative pension contribution and accrual behaviours.

How it will make a difference

The findings will inform future policy considerations and reforms to improve pension saving and retirement outcomes for low earners. They will be disseminated through briefings notes, technical papers, and a comprehensive report. Key stakeholders – including government bodies, charities representing lower income groups, and other industry stakeholders – will be engaged throughout the project, including through an expert roundtable event.