Young people caught between pensions rock and low pay hard place

Young people are unable to save for retirement because they work in places like shops and hotels that no longer provide workplace pensions and are earning too little to save enough on their own, according to a TUC report published today (Thursday).

The report, launched at an event for young people on pay, pensions and poverty, says that the only solution to their pension problems is for all employers and employees, other than the very low paid, to be made to save a set amount into a pension. Pensions Minister Stephen Timms MP will speak at the event.

With low pay and no pension on offer where they work, many young people are caught between a rock and a hard place. TUC General Secretary, Brendan Barber, said, Saving for a decent retirement will remain an insurmountable obstacle for young workers unless the government makes all employers pay into decent work pensions, with employees paying in their share too.

Problems and solutions for young people from the TUC’s ’Pay, poverty and pensions’ report:

Pensions ’rock’
Only one in ten hotel and restaurant workers and a third of people working in retail and distribution have a workplace pension. Nearly 40 per cent of 16 - 25 year old workers are employed in these sectors (1.7 million young people).

The sectors where most workers have a work pension employ few young people. Around 90 per cent of workers in energy and water have workplace pensions but under one per cent of under 25 year olds are employed in these industries.

The only way to ensure that young people are saving enough for their retirement (at least 15 per cent of earnings) is to introduce a compulsory pensions system, the TUC has told the government and the Pensions Commission, which will report next month. The TUC has recommended the phasing in of compulsory employer contributions to staff pensions of 10 per cent, with employees paying in five per cent of pensionable earnings above 6,000.

Low pay ’hard place’
On average, the National Minimum Wage has benefited one in ten young workers and narrowed the gap between the lowest paid 18 - 21 year olds and average young workers. But over half the families with a head of the household who is under 25 live in poverty and the TUC estimates that 15,000 - 20,000 young people are illegally being paid less than the minimum wage.

To tackle low pay and poverty among young people, the TUC recommends that the adult rate of the minimum wage should be paid from the age of 18, the rate for 16 and 17 years olds significantly increased, and the government should make further efforts to enforce young people’s minimum wage rights. The report also suggests a single system of welfare support for young people that does not favour education over vocation and is integrated with housing benefit.

Thursday 20 October ’Pay, Pensions and Poverty - policies for young people’ (1pm - 4:30pm) A seminar on the significant impact of government policies on pay, pensions and poverty among young people at TUC Congress House. Speakers include Pensions Minister Stephen Timms MP, acting Chair of the Equal Opportunities Commission Jenny Watson and Minister for Children and Families Maria Eagle MP. For media credentials email: rjethwa@tuc.org.uk Tel: 020 7467 1245.