Persistent low earnings pose a challenge to retirement outcomes, especially for women, young people, and the self-employed, according to research by the Pensions Policy Institute (PPI).

The report, the first in the From Payslip to Pension: Life Course Impacts on Retirement Saving Among Low Earners series, examines the long-term challenges faced by low earners in building retirement savings.

The first report, named Part One: Persistent Low Earning, revealed how factors such as gender, motherhood, self-employment, and qualifications impact lifetime earnings and pension outcomes.

In particular, the report highlighted that persistent low earning is more dominant among women, who spend almost twice as many years as low earners across their careers compared to men.

In terms of factors influencing this, having low qualifications and having children mean women are more likely to be persistent low earners.

The PPI said that although either of these factors can increase the chance of being a low earner, women with both risk factors have been identified as being especially at risk of being persistent low earners.

Meanwhile, for men, a key risk factor of low earnings is self-employment, which PPI said is distinct from other risk factors as the self-employed are not automatically enrolled in defined contribution workplace savings schemes.

Research showed that self-employed men are more likely to experience low earnings than employed men, but the duration of low earnings is similar for both groups.

PPI explained that the precise definition of low earning is important, due to differing rates of persistent low earning across different income levels within the low-earning population.

Indeed, those who earn less than a full-time Living Wage are “significantly” more likely to be persistent low earners than those who earn below the trigger income for automatic enrolment.

The report also indicated that low earning itself is a predictor for future low earnings.

Indeed, it found that how we define low earnings changes how strong the link is, but overall, this shows that low earnings are usually caused by deeper problems, not just random chance that could happen to anyone.

The report also found that people who earn little money currently are more likely to keep earning little in the future.

Additionally, how low earning is defined changes how strong this link is, and overall, it showed that earning little isn’t random; instead, it is caused by deeper, ongoing issues that do not affect everyone equally.

The report also explored other factors such as living with a partner and youth, as young people were found to be particularly likely to be low earners.

For example, when measured against a low earning threshold of £10,000, 22-year-old women will spend an average of 3.8 years low earning, regardless of their current income.

In terms of gender of young low earners, there is an 11 percentage point difference between men and women, with 37 per cent of women and 28 per cent of men being low earners at 22.

In terms of living with a partner, the PPI report said that whether a low earner is living with a partner at a given age has “relatively little bearing” on their future low-earning outlook compared to other risk factors.

However, the analysis suggested that female low earners who live with their partners in their twenties are more likely to be low earners for longer, with this gap most apparent at age 26, as those living with a partner have an expected 15.5 years of low earnings, compared to 14.6 for those who do not live with a partner.

The report also highlighted the impact being single has on an individual’s retirement, as they face greater pension challenges than those with partners.

Indeed, single people are unable to save by sharing living costs in the same way that couples can.

Additionally, state pension entitlement is calculated on a purely individual basis, meaning that couples can receive two full state pensions despite not having double the living costs of a single person.

“This research highlights a key factor to consider when designing policy around low earners: some low earners are more persistent than others,” the PPI said.

“Persistent and transient low earners have different needs, both in working life and retirement, and policymakers who aim to design pensions policy around low earners need to be mindful of the wide range of outlooks of the different groups within the low-earning population.

"This research reveals insights into which low earners are most likely to be persistent, which is useful by itself, as it could inform policy intervention."

The series of papers will run until summer 2026 and consist of five themed individual outputs, and was funded by a grant from The Nuffield Foundation.

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