Increasing minimum auto-enrolment contributions without broader reforms could worsen the gender pensions gap, despite improving overall retirement adequacy, the Pensions Equity Group (PEG) has warned.

In a new report examining the impact of potential auto-enrolment reforms, the group argued that policymakers should prioritise introducing a financial safety net for low earners before implementing planned changes to workplace pension saving.

The report comes as the government's newly established Pensions Commission considers options for improving retirement outcomes, including changes to auto-enrolment eligibility criteria, earnings thresholds and contribution rates.

PEG highlighted government research showing that nearly 15 million working-age people are not on track for an adequate retirement income and noted that the gender pensions gap currently stands at 48 per cent, meaning women approaching retirement can expect private pension incomes more than £5,000 a year lower than men.

With this in mind, the report assessed four commonly discussed auto-enrolment reforms: lowering the minimum enrolment age from 22 to 18, removing the lower earnings limit (LEL), removing the £10,000 earnings trigger, and increasing the minimum contribution rate from 8 per cent to 12 per cent.

According to PEG, reducing the enrolment age to 18 would have a small but positive impact on both retirement adequacy and pensions equity by allowing more women to begin saving before experiencing career interruptions linked to caring responsibilities.

The group estimated that around 406,000 additional women and 197,000 additional men would become eligible for automatic enrolment under such a change.

Meanwhile, the report identified the removal of the lower earnings limit as one of the most effective measures for tackling pension inequality, arguing that it would disproportionately benefit low earners, many of whom are women.

It suggested that removing earnings bands entirely could increase projected retirement pots by 24 per cent for men and 28 per cent for women.

PEG also said removing the £10,000 earnings trigger would bring an additional 1.2 million women and 328,000 men into auto-enrolment.

However, it cautioned that doing so without simultaneously removing the lower earnings limit could create unintended consequences, including interactions with means-tested benefits such as Pension Credit.

While the group acknowledged that raising minimum contributions from 8 per cent to 12 per cent would significantly improve pension adequacy, it warned that such a move could increase the gender pensions gap if large numbers of women continue to be excluded from pension saving due to lower earnings and non-linear career patterns.

The report therefore called for a phased introduction of all auto-enrolment reforms, underpinned by a financial safety net designed to protect low earners from financial hardship.

Suggested options included sidecar savings arrangements, similar to Nest's model, and non-contributory pension designs that would allow employer contributions to be paid even where employees are unable to contribute.

Setting out its policy recommendations, PEG called on policymakers to prioritise a financial safety net before introducing wider reforms, ensure that any removal of the £10,000 earnings threshold is accompanied by the removal of the lower earnings limit, and recognise that increasing contribution rates alone could exacerbate pension inequalities.

PEG co-chair of the data and research workstream, Kathryn Fleming, said the organisation was keen to contribute to discussions around the future of auto-enrolment and pension adequacy.

“With the launch of the Pensions Commission, and its first interim report, many will be looking at auto-enrolment interventions, so we are keen to share our thoughts on the role the interventions might play in shaping a pensions system that is not only adequate, but fair,” she stated.

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