An important reminder
The Pensions Regulator reported earlier this year that more than 8 million workers had signed up for a workplace pension since the introduction of Auto-Enrolment (AE) requirements in the UK. This is of course a major milestone, yet it would be foolish to believe that large numbers of new savers equals the resolution of the pensions savings gap for the nation.
Clearly the next step in this process is to ensure that all those now in pension schemes are saving enough to deliver an adequate level of retirement income at the end of their career. This is why the minimum contribution levels from both employers and employees are required to increase in April next year, and then again just a year later.
Yet I suspect that many employers are not really prepared to implement and/or fund this increase, and even those that are may not have actually communicated this issue to their workforce since enrolment took place. This is concerning given that the first change is now less than six months away, and it follows that employers really need to be gearing-up for this major challenge before the end of 2017. For more information on the dates of increase please visit the Pensions Regulators webpage.
Of course your organisation may well be one of those where pension contributions already exceed the minimums required in 2019, and will therefore not be impacted by these changes. Yet even those employers can and should expect further changes to the AE requirements in the not too distant future.
The Department for Work and Pensions Automatic Enrolment Review is expected to publish its findings before the end of the calendar year. The review is intended to focus on three key areas:
- Contribution Levels
Whilst the actual outcomes of the review are not yet known, early indications suggest that there will be no immediate call for a further increase in contributions beyond the 2019 levels. This is however likely to be only a temporary respite, given that virtually everyone within and outside of the pensions industry accepts that the AE minimum contribution levels are far from adequate.
Yet the same sources are also suggesting that many more employees – and in particular younger workers – might soon be eligible for automatic pension scheme enrolment. So employers are likely to face some changes to their AE offerings sooner rather than later. We will of course report back on the outcomes of the DWP review once it is published.
In the meantime we would encourage employers to urgently review their contribution structures and employee communications in light of the changes in 2018 and 2019. For more information or assistance on this issue please speak to your usual Jelf consultant in the first instance.