As an individual who has worked in Financial Services for over 20 years, I breathed a huge sigh of relief when the concept of pension’s Auto-enrolment was first introduced. Funding for retirement (using Pension schemes) has, for far too long, been something ‘to be done later’, with some serious consequences for an ever-aging population.
Since October 2012 employers have been required to offer a Qualifying Workplace Pension Scheme, and the greatest concern I have is for those individuals who make the choice to ‘opt out’.
Auto-enrolment provides a chance for people in the UK to start saving and receive a monthly contribution from their employer. Rather than something to be scorned or even afraid of, employees need to embrace the opportunity to save and accept the extra money going into their pension pot.
I believe that giving people the chance to opt out should be stopped. As a family man I fully appreciate the need to think about today, but actually who is going to pay for my tomorrow if I don’t? Our country continues to recover from a financial crisis and part of its recovery is by making cuts.
In embracing Auto-enrolment and investing a (relatively) small amount of money every month, the retirement life stage of a person could be significantly improved. To opt out when you are younger would be a false economy and one which can never be reversed.
As I made reference to earlier, life expectancy continues to rise and as a result our money must last longer. Those who do not plan their finances will discover this is an unwelcome surprise further down the line.
Pensions are just one of the many factors that need to be considered when planning for retirement. Pension’s Auto-enrolment brings the chance to put some money aside and have your employer be obliged to help make your fund greater. Retirement should be an enjoyable and relaxing time, without financial stress and worry.
Auto-enrolment – not guaranteed to make auto engagement!
Auto-enrolment is a massive step forward for pensions. Significant and helpful as it is, it will not address the massive pensions underfunding across the workforce, nor 'fill the pensions gap'.
In talking to some Employers who will be reaching their Staging Dates in the next 2 years, I wonder whether the impact of this Legislation has really been considered.
The fact is there will be huge numbers of employees who have never been entitled to (or considered making) a pension contribution, and they will suddenly find themselves not only being enrolled into a scheme (which may not be the type of scheme they would have chosen for themselves) but also being required to make payments into it. This could see many employees confused by, or worse still, resentful of being forced to take part.
At the EB Partnership we have always seen communication as key in any Employee Benefits scenario, and so we would strongly recommend that when considering how to comply with this Legislation, a budget is created to allow the new pension scheme/s to be communicated to the workforce in the right way (i.e. paper based if pc access is likely to be a problem). This gives the employer the opportunity to achieve a real return on their investment spend and have it perceived as a very positive move forward, rather than risking any employee simply viewing this as a brand new form of taxation.
Auto-enrolment should be seen for what it is - a way of bringing millions of new members into saving for their own retirement for the first time. It will bring with it many challenges, but the support is out there....