Do you know about the UK pension shake-up?
Auto-enrolment is one of the biggest pensions changes in decades, but most employees are still in the dark about how they will be affected
More than half of UK workers are in the dark about the huge changes to the pension system that will see them automatically enrolled into their employer’s pension scheme from October.
The Workplace Pensions Report 2012 by insurer Scottish Widows shows 52%, or 9.9 million, workers in the UK are unaware of auto-enrolment.
Under the government’s new plans, workers who do not already contribute to a workplace pension will be auto-enrolled into one – workers in larger companies will be auto-enrolled from October, with those in smaller companies will be auto-enrolled over the next five years.
However, it is not a compulsory scheme, and workers will have the opportunity to opt out. Employees will continue to be auto-enrolled every three years and must continue to opt out.
Lynn Graves, head of business development for corporate pensions at Scottish Widows, said it was ‘shocking’ that with just three weeks to go until auto-enrolment starts there was still a gap in awareness.
‘Auto-enrolment is designed for people who traditionally don’t have access to a workplace pensions scheme, such as smaller employers of those with lower incomes, and it is clear that information is still not reaching the audience it is intended to target,’ she said.
Wanting to save more
Although many employees are unaware of the changes that make it easier for them to save, many wish to do so.
Just 11% of workers said they would opt out of the scheme, with 32% of those who would not take part stating that they could not afford to save.
However, those who are willing to save want to save a lot more. The amount that workers want to save has doubled since last year, from £37.50 to £76.95, although a third of people still said this level of saving would not be enough to provide them with an acceptable standard of living in retirement.
Graves said: ‘It is clear from our research that people are failing to save enough for their future, especially in relation to retirement.
‘While it is a positive sign that people are willing to pay more into their workplace pension, substantial work must still be done to encourage people to save enough for retirement and this is a challenge for government, the pensions industry and employers.’
She added that Britain was ‘slowly waking up to the reality of how we are going to be able to fund our retirement?’, with people realising they will not be able to rely on the state to provide the majority of their income.
In fact, just 2% of employees surveyed felt the state pension would provide sufficient income.
Achieving pension targets
A total of 70% of employees surveyed said they wanted to retire at age 65, and 48% want to have an income in retirement of between £15,000 and £30,000.
Individuals intend to use a number of sources to fund this income, with company pensions the number-one source of income – 33% of people said their company pension would help ensure they had a comfortable retirement.
The state pension will play role in 40% of people’s retirement plans, and personal pensions will make up part of the retirement income for 32% of people.
Although the state pension was the most popular choice as a funding source for retirement income, individuals are realising they have to take more responsibility for their old age.
When asked whether individuals will have to take more personal responsibility for their financial security in retirement, 32% strongly agreed and 42% somewhat agreed.
How to increase savings
Employers can play an important role in their employees’ savings habits, with many of those surveyed keen to access different financial products through their employer.
A total of 39% said they would like to save into an employer pension, 17% said they would like their workplace to offer a cash ISA, 15% wanted to obtain mortgages through their employer, and 14% would like access to loans.
Jim Bligh, head of labour market and pensions policy at the Confederation of British Industry, said employers needed to review their offerings to employees.
‘All these changes in the pensions landscape offer an opportunity for employers to look at their wider reward package. Employers need to ensure that they are fine-tuning their reward package to the needs and demands of their employees, so they are able to recruit and retain the best talent available,’ he said.
‘With personal incomes under pressure, we are seeing a greater appetite for a mixture of long-term and short-term saving options being available to employees.’
Written by Michelle McGagh, Sep 10, 2012 at 00:01 posted on http://www.citywire.co.uk, follow the link below to read more;
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