Pension changes 2012 onwards: what impact on you and the economy?

vivatifosi

This is something I was discussing with other pension trustees recently and thought would make an interesting discussion point.

From 2012 the rules on pensions will change. Although changes are being phased in, agency workers, temps and part time workers will also be included in the new legislation.

AIUI, employees who currently have to opt in to pension schemes would then have to opt out. Given it will be really large firms that are hit by the changes first, what will the impact be for say, big retailers? Would they need to put up prices if their wage bill increases by, say 3%? Would the low paid all opt out - research suggests that people are lower to opt out of things than opt in?

If more people pay into pensions and their disposable income drops, what impact will that have on the economy and house prices?

For background reading, here are some articles on:
1. Impact on companies and HR:
http://www.humanresourcesmagazine.co.uk/news/1016818/2012-pension-changes-mean-manage-costs-minimise-negative-staff-reactions/
2. Impact on/what's happening with SERPS and squeeze on pension credits:
http://www.saga.co.uk/money/pensions/TheNutsAndBoltsOfTheUKPensionPlanChanges.asp
3. Martin's views:
http://www.moneysavingexpert.com/news/banking/2010/03/major-pension-changes-imminent
4. Cost impact for employers of the low waged:
http://www.bllaw.co.uk/services_for_businesses/employment/news_and_updates/employment_law_news_june_10/2012_pension_changes.aspx
5. The dry stuff, from DWP: http://www.dwp.gov.uk/policy/pensions-reform/

There is very little being written as yet from an individual employee's standpoint. Most is being done to get firms ready, so this may come as quite a surprise to people.

What do you think?

ETA: have asked this here rather than on the pensions board as I'm more interested in the impact on people and the wider economy than the technicalities of pensions.

kabayiri

I know a few people in my line of work who have changed their retirement funding plans over recent years.

Some bought property here and abroad. Others chose to pay off existing debts more quickly.

You can argue the rights and wrongs of these changes, but these people were adapting to change.

Are future pension schemes going to be flexible enough to recognise that people will not always be in work, and they may have to seek work elsewhere in other countries?

Personally, in my line of work, I have absolutely no certainty in what I will be doing in a few years time. When faced with this outlook you keep more in reserve in easily accessible funds, and commit less to pensions which are quite rigid by comparison.

From a people perspective, I think the debate should be about how we encourage longer term saving across the board. This doesn't seem to sit well alongside a consumerist economy however.

vivatifosi

kabayiri wrote: »

Are future pension schemes going to be flexible enough to recognise that people will not always be in work, and they may have to seek work elsewhere in other countries?

Personally, in my line of work, I have absolutely no certainty in what I will be doing in a few years time. When faced with this outlook you keep more in reserve in easily accessible funds, and commit less to pensions which are quite rigid by comparison.

From a people perspective, I think the debate should be about how we encourage longer term saving across the board. This doesn't seem to sit well alongside a consumerist economy however.

Great post kabayiri, apologies for shortening for quote.

FWIW I think the government has realised it needs to start getting people to save for their future. This isn't a new thing, the changes started in the mid 90s (equalisation between men and women) and have continued under Labour. This is just the latest phase and possibly the one that will impact on people the most. I believe it is part of a gradual phasing in of making people save for their retirement and to stop pension credits going through the roof.

I can't for one minute see these changes reversed under the coalition, if anything I can see the timelines shortened, as is being planned with the raising of retirement age.

I'm just surprised that there is not more discussion of the change. There's talk of the Olympics regularly - that's the same time away and will only last two weeks. This will impact on people for years and yet there's hardly an article written - especially from the viewpoint of employees.

PasturesNew

I've no idea about any of it. I don't have a pension, I don't understand them.

I do wonder though how that'd work out for people that have many employers/year, e.g. if you're in a job, then laid off and so you go through 3-4 temping companies (1-2 weeks work in each), then you get another new job. Then the next year you change jobs again. Then the year after you get laid off and work for 4-5 temping agencies before doing some self-employed work, then getting another job.

That's how my life's been for the past 25 years.

CLAPTON

presumably the most likely outcome will be that emplyers currently paying more than 3% into pension funds will reduce their funding to the legal minimum with a resulting reduction is overall saving and pension provision

vivatifosi

CLAPTON wrote: »

presumably the most likely outcome will be that emplyers currently paying more than 3% into pension funds will reduce their funding to the legal minimum with a resulting reduction is overall saving and pension provision

The companies I've spoken to have said they aren't going to do this, but having said that they are the type of companies that don't employ swathes of people on minimum wage. It may be different at that end of the market where the impact is going to be heavier. I've also spoken to one retailer that said that they won't, but they have a fairly heavy CSR programme.

olly300

PasturesNew wrote: »

I've no idea about any of it. I don't have a pension, I don't understand them.

I do wonder though how that'd work out for people that have many employers/year, e.g. if you're in a job, then laid off and so you go through 3-4 temping companies (1-2 weeks work in each), then you get another new job. Then the next year you change jobs again. Then the year after you get laid off and work for 4-5 temping agencies before doing some self-employed work, then getting another job.

That's how my life's been for the past 25 years.

For temping agencies it's going to be a mess especially if they are only employing people for a few weeks.

With regards to the self-employed I won't be surprised if they are forced into the government NEST scheme at some point.

michaels

This is a bit of the privatisation of pensions - I am sure most of those effected would currently be on low income and probably eligible for the pension minimum pension guarantee so at retirement time it will be less for the govt to pay out by forcing employers to part fund the gap - and of course like the child trust fund lots of money in fees for their friends in the city (and they all have friends in the city).

michaels

For me paying pension is potential converting 40% tax now to 20% later but given how little trust I have in future govts not changing the rules I would still rather take the income now and invest flexibly.

CLAPTON

vivatifosi wrote: »

The companies I've spoken to have said they aren't going to do this, but having said that they are the type of companies that don't employ swathes of people on minimum wage. It may be different at that end of the market where the impact is going to be heavier. I've also spoken to one retailer that said that they won't, but they have a fairly heavy CSR programme.

I think the problem here isn't what companies say they will do but what in practice they actually do.

I can't recall companies saying they would close their final salary schemes in advance but rather waited until they had decided the issue before announcement

tomterm8

I don't trust pensions. I would prefer to invest my savings where I want to, rather than trusting a government that may nick the money to buy votes.