Pensions Reform - Everyone will go in

Mudd14

I am drawing up a reply to be submitted to review team who have been apppointed by Ian Duncan Smith in relation to the Pensions Reform - Automatic Enrolment. I attentded a very worth while round table meeting at the DWP with the review team and other major employers.

I just wanted to see what peoples views were on the reform? Have you even heard about it?

The basics of the reform are as follows;
The reform will mean that every employer must auto enrol all of its employees from day 1 of their employment, all current employees must also be enrolled from day 1 of the scheme starting. Employees are fully entitled to opt out but they can only opt out once they have been out into the scheme, a refund of deductions is given once an opt out notice is recieved by the employer. However the opt out can only be obtained from the scheme provider.

As far as deductions are concerned once the scheme is fully phased in employees must contribute 5% and employers 3%. To start it will be set at 1% for each and phased in over a few years.

The reform will include ALL employers from 1 employee to multinational organisations. So it will catch nanies, trades men etc

What do people think? Is it wise to automatically enrol people? Should they be given a choice to be entered into the scheme? Any other concerns?

LondonDiva

I think this is a really good idea - there's not enough thought to saving for the future, natural apathy means that the safety net will catch more people than not and also that a greater mass of consumers will see providers competing for business and upping their game.

About time, IMHO for this to happen.

emilyteach1

Mudd14 wrote: »

What do people think? Is it wise to automatically enrol people? Should they be given a choice to be entered into the scheme? Any other concerns?

I think it's wise to automatically opt people in, but the opt-out route must be easy. I was automatically opted-in to an old employer's pension scheme when I had my 25th birthday [rather than on the date I started employment]. I eventually opted out, but it was a struggle.

I opted out straight away, but the system was so inefficient that 3 x 3% deductions were made over 3 months before I was removed, and then it took another 6 months before I got my refund.

The advantage to automatically opting in is that it raises awareness of pension saving, and employees can benefit from employer contributions too. Many employees may not notice 3-5% deducted from their gross pay, but unfortunately I did.

For the time being, I am limited to making my own on-off savings from my net pay, as my income is quite low and giving up 3% on a monthly basis [even from gross pay] can really tighten things for me. As such, I'm not benefiting from the tax efficiency or the employer's contribution, and am struggling against inflation rates vs. savings interest rates. I try to maximise my returns any way I can, including using promotional regular savings accounts [which usually come with 5%+ AER and are appropriate to the kind of amounts I can afford to deposit], and short term fixed rate bonds for my small lump sums.

In the not too distant future, I expect for my income to rise and stabilise, and I will hopefully find myself in a position whereby I'd be happy to be automatically enrolled in a scheme.

paulwf

At the moment companies with more than five (I think) staff have to offer a pension scheme. In some sectors the take up seems to be non existent so there doesn't seem to be much demand for it.

Undoubtedly state pensions are not going to be enough in years to come so something needs to be done. I really don't think this scheme is the right way to do it although admittedly I haven't seen all the details about it.

How will the pension scheme be managed? Will you be able to change the risk v return level? Will the employer have to provide any details required? What happens if you have 2 jobs? What happens if you change jobs? Will most opt outs be from those on min wage as they are likely to be in most need of the pension but also can't afford a few percent drop in wages?

Big companies with HR departments will be ok but I'm sure I'm not the only small business owner that really doesn't look forward to having to administer a pension scheme. I really don't want to have to give pension advice to staff, it's difficult enough understanding the finer points of my own pension!

I think the scheme should be run independent of employers, it seems to have been dreamed up by civil servants in what used to be jobs for life, they should see the catering trade where staff move around all the time. It also doesn't account for self employed working which is likely to increase.

I would like to see everyone having their own simple to administer pension scheme then it is up to the individual not the employer to look after it. Another option would be to increase NI with the extra protected to be used for pension payment only.

It will be down to the detail...it has to be a very simple and easily transferable scheme or staff and owners of small businesses won't have a clue. A private pension that you can manage yourself sounds a much more attractive option.

LittleVoice

I normally joined occupational pension schemes as soon as I could. However on one job change I delayed joining by about ten months because I was sole wage earner at the time and it seemed we needed every penny. Having to wait months to retrieve my contributions would not have helped finances then - might have got into debt and be worse off now.

PasturesNew

Mudd14 wrote: »

I just wanted to see what peoples views were on the reform? Have you even heard about it? - eh? What? Put me down as a NO.

Mudd14 wrote: »

The basics of the reform are as follows;
The reform will mean that every employer must auto enrol all of its employees from day 1 of their employment, all current employees must also be enrolled from day 1 of the scheme starting. Employees are fully entitled to opt out but they can only opt out once they have been out into the scheme, a refund of deductions is given once an opt out notice is recieved by the employer. However the opt out can only be obtained from the scheme provider.

As far as deductions are concerned once the scheme is fully phased in employees must contribute 5% and employers 3%. To start it will be set at 1% for each and phased in over a few years.

The reform will include ALL employers from 1 employee to multinational organisations. So it will catch nanies, trades men etc

What do people think? Is it wise to automatically enrol people? Should they be given a choice to be entered into the scheme? Any other concerns?

How does that work for people in/out of work, with many different employers? e.g. take a case where you're employed, that job finishes, so you sign on with 4 job agencies for temp work, temp work is really a 0 hours contract but over the next 6 months you work for all 4 agencies, with gaps, for 3 weeks apiece, then you find another employer and get a 'proper job' again?

How hard would the paperwork be?

Would issuing 0 hours contracts to everybody enable employers to wiggle out of it?

dave4545454

people are very wary of joining any pension these days cos of all the cases where other people have been ripped off.

i personally don't know a single person who has a pension.

PasturesNew

Yeah, loads of people have lost fortunes in pensions... and pensions rules mean that if you start one, then have a year or so where you can't afford to pay in, it's all locked up and you can't re-open it again.

And, it's all so complex.... and so, for many, we don't do anything. We can understand doing nothing, we can't understand pensions .... but we do understand that we'd probably get out less than we paid in, or lose the lot. Better to spend it on stella and fags

Savvy_Sue

It will be a nightmare to administer: yes the pension providers will want details of the employees, yes the employees will have to provide these, but how do you force them to do so?

We have a stakeholder scheme at work, it can take me MONTHS to extract the necessary paperwork from my colleagues! And that's a scheme where they don't HAVE to contribute, but the employer pays 2%.

Also I'd like enrolment to be compulsory only on contracts longer than 6 months. At that stage we backdate the employer's contribution to day 1, but give employees the choice of whether or not they contribute.

Nightmare with 'bank' staff too.

all paulwf's points are very valid!

Googlewhacker

I read on another thread about this that employers are not even allowed to tell their employees there is an OPT OUT option, now I don't know how true this is but that is ridiculous if it is.

pinkshoes

dave4545454 wrote: »

people are very wary of joining any pension these days cos of all the cases where other people have been ripped off.

i personally don't know a single person who has a pension.

I don't know many people who don't have a pension...

I think so long as you have SOME sort of savings for your pension, then a pension isn't essential.

i.e. owning your property outright when you reach 60, or owning a 2nd property that will give you an income at retirement age, or having a HUGE amount of savings.

Those I know who don't have a pension all own BTL properties which will have the mortgage paid upon retirement and act as a source of income.