Is the work place pension just ruining pensions for everyone else

little_alien

Please correct me if i'm wrong but just seems like the workplace pension is a bad deal?

My last Job my pension was based on a ratio of 1:2 IE i paid min 1.5% and employer paid 3% - and that worked up to 3.5% and 5%

so now since workplace pensions have come in no companies are offering anything like that. and been stuck paying more than the employers.

been to 3 job interviews recently and all 3 stated the are moving to workplace pensions.

Does than not mean unless your working for public sector decent pensions are going to Disappear?

JoeCrystal

The auto-enrollment is currently 5% from you and 3% from the employer this tax year although I have a real problem with qualifying earnings aspect. My employer decided to switch from a version based on the basic pay to the qualifying earning (Still 5%/3% but ignore the first £6000 of your earnings)). You have to bear in mind that in the private sector, a high number of workers didn't have a pension scheme to pay into so the autoenrollment is improving the pension schemes available overall. So it is not a bad deal at all for society on the whole.

The auto-enrollment contribution rate, in my opinion, could be better but it is better than nothing, and I am sure in the long run, it will improve. I reckon that the employee and employer contribution rate will be the same few years down the line.

Anyway, what do you consider a decent pension? Nothing is stopping you from applying to the public sector jobs to get a sweet pension scheme after all.

In 2012, only 2.7 million private sector employee was in the work pension scheme. By 2017, it is 8.8 million employees and likely will be higher as time goes by.

worried_jim

I pay 5% they pay 13% = dead happy.

AnotherJoe

little_alien wrote: »

Please correct me if i'm wrong but just seems like the workplace pension is a bad deal?

My last Job my pension was based on a ratio of 1:2 IE i paid min 1.5% and employer paid 3% - and that worked up to 3.5% and 5%

so now since workplace pensions have come in no companies are offering anything like that. and been stuck paying more than the employers.

been to 3 job interviews recently and all 3 stated the are moving to workplace pensions.

Does than not mean unless your working for public sector decent pensions are going to Disappear?

"no companies" = "3 companies" ???

woolythoughts

Doesnt this just reduce the benefits bill rather than benefitting the retired person.

Unless your pension is of sufficient amount, all having one will do is reduce the amount of housing benefit/state support you get in old age.

Those in low paid jobs will struggle to put enough away to get a decent amount.

Therefore they are worse off when working for very little benefit in old age.

Prism

I wish auto-enrollment had been around when I started work as I never worked for a single employer that paid anything towards a pension. It can only be a good thing now its required.

Even the minimum of 8% over a period of a working career can go a long way to providing a half decent pension in retirement - certainly in combination with any state pension. It also encourages people to think about their future and at least consider higher contributions.

little_alien

A " Good pension " = well since the glory days of final salary have long gone, Simply employers paying more than the employee?

@AnotherJoe - ok "no companies is a generalisation"

however if you look at it from an employer point of view and lets for example say they are offering contributions of simple 1:2 ratio

Employee - 2% and Employer 4%

From a employer POV you could save a packet on your pensions bill and as stated in the "Auto Enrollment Guide" still claim it against the company tax.

My point is that 3 out of 3 private sector interviews and all 3 said no we've only got auto enrollment now.

While i fully get why the WP PEN is here to fill the gaps i wonder if they foresaw companies with existing pensions jumping on the bandwaggon

it may be cynical but i cant see there being any pensions where employers pay more in a few years...

westv

Prism wrote: »

I wish auto-enrollment had been around when I started work as I never worked for a single employer that paid anything towards a pension. It can only be a good thing now its required.

I had to wait 9 years in order to be old enough to enrol in my first employees final salary scheme.

Pension_Geek

If you value a pension, then you either join a company that has a good scheme or make your own arrangements. AE is there primarily for those that were saving nothing.

I would be surprised if companies reduce contributions because of AE, as they didn't have to have the generous terms previously. AE might just be the catalyst for a generation of people who have no pension, to finally take some interest. If people leave workplaces for a 'better pension' then employers will soon notice.

Nasqueron

My first job full time had no pension at all, second had a basic contributing one, next one had a nicer one where they paid a fair bit into it alongside your own (iirc it was matched to 5%) - we were bought and the new employer was begrudgingly paying AE once it came in as he never gave anything before that. When I moved jobs the firm also only did AE and again when we were bought the new employer also did AE. I am not saying this is anything but anecdotal but I don't imagine there are tonnes of companies lining up to give new employees fantastic pensions

ex-pat_scot

The companies I review tend to run Auto Enrolment alongside existing GPPP (DC) staff schemes. I've not seen any where the existing scheme has been dialled down to AE minimum contribution levels, partly because that would be a significant change to contracts of employment (effectively forcing a pay cut on staff, if forcing them onto a poorer pension scheme).


I guess the wider questions are around whether current contribution levels and participation levels are acting as intended ie to provide a good base retirement income, or whether they are providing false comfort? (ie a presumption that if you contribute the minimum then somehow you have taken care of a comfortable retirement).
Secondly - will there be the temptation to gradually decay the SP and assume that AE will bridge the gap?
Thirdly - will companies gradually migrate to the AE thresholds over time ie a race to the bottom? (as is what the OP is suggesting).


In general, AE has been a great story in getting pensions on the agenda, with gradual nudges for both employee and employer, and slowly building up savings.
it's far from perfect: the minimum earnings threshold needs to go, and there's little reason to keep the upper cap.
The whole pensions world still needs much attention - lifetime allowance, DB vs DC treatment, annual allowance, tapering, access ages, and the "certainty" that we so desperately need in order to build the long term trust that they will be free from adverse meddling.