October 1st, the day Auto-enrolment started, may just have signalled a revolution in how we save for retirement. By 2017 every business will have to automatically contribute to and enrol all staff over the age of 22 who earn more than £8,105 into a workplace pension. When it’s fully up and running, it’s hoped that six to nine million more people will have a private pension. At Age UK, we sincerely hope it will be the nudge some people need to start saving.
Just 2.9 million people paid into a workplace pension last year, an all- time low and a deeply disturbing trend when combined with rising life expectancy. Yet more people are living longer after retirement than ever before, many of them struggling on a basic state pension of around £107.
Auto-enrolment is an important first step in reform, helping people begin to build up a nest egg for later life . But in order to fully live up to its potential, the Government has to go further and faster.
Age UK believes if auto-enrolment is to appeal more widely, particularly to those on low incomes, the Government must deliver its commitment to a flat rate pension . This should alleviate the concerns of those who fear it will jeopardise any means tested benefits they receive and give them a better idea of how much money they should expect at retirement, encouraging them to save.
Continue reading “Auto-enrolment is rolling out”
This blog first appeared in Money Marketing
The growing number of people with multiple small pension pots has been an issue for too long.
The government itself has calculated there will be an additional 4.7 million more small pension pots in the years to come as a result of the introduction of auto-enrolment, government moves to extend working lives and increasing job mobility.
So, Pensions Minister Steve Webb’s announcement that he has launched a consultation to simplify the system and make it easier to amalgamate small pots is excellent news. For millions of people with modest pensions accumulated over their lifetimes, the right changes to this currently restrictive and overly complex system could mean a simpler and more cost-effective introduction to retirement.
Age UK has been lobbying for some time for the Government to recognise the difficulties facing these pension savers.
In particular, we’ve been calling for the ban on transfers into the National Employment Savings Trust (NEST) to be lifted so that people leaving an employer can be encouraged to transfer their pension savings and can hold them in one single lifetime account with low charges. This needs to be introduced as early as possible and well before 2017 when a review of the ban on transfers is currently expected. As part of the general shift from defined benefit to defined contribution pensions, there will be many people coming up to retirement with small pots in the next few years, and public attitudes towards pensions will be damaged if they find it difficult and complex to access their savings.
The government took the first step in overhauling its pensions legislation in the Autumn Statement when it announced that, from April 2012, savings under £2,000 in a maximum of two personal pensions can be paid out in cash. This reform has been on the cards for some time so we’re pleased that it is finally being implemented.
Let’s hope that Steve Webb’s announcement heralds the next big step in transforming the system so that it works in favour of all pension savers, not just those who have been able to accumulate large savings.