Independent Financial Advisers Glasgow News & Guides

With just six months to go until the largest employers start automatically enrolling employees into pension schemes, Friends Life has revealed new research showing that 61% of consumers admit they are not confident in their own abilities to save enough to fund their retirement without government or employer intervention.

Just 39% believed they could save enough on their own, without being forced to save by the government or being auto-enrolled by an employer. 

The research also revealed that only 8% of respondents rate saving for retirement as their financial priority and less than half (48%) are making regular contributions into a work based pension at the moment. Around 19% don't have any pension at all, one in ten (11%) doesn't know how much they contribute to their pension and 35% save less than £100 a month.

When asked how they would feel if the government made it compulsory to save into a pension, nearly half (46%) said they would see it as a helpful way to ensure they got a decent level of savings. A quarter (24%) said they would view it as an additional form of tax that they wouldn't want to pay, while 30% said they didn't have any strong feelings about it.

Findings also revealed:

• 5% aren't sure whether they have a pension or not,
• 3% don't know if their employer offers a pension which they could be saving into already and 8% say they have declined to join their employer pension scheme,
• 33% say paying off debt is their top financial priority, and
• 15% say saving for a house deposit is the most important financial challenge to them.

The TUC has urged the government to freeze the lower thresholds in the auto-enrolment regime - keeping the bottom of the earnings band on which contributions have to be paid (£5,564) and the earnings level at which auto-enrolment is triggered (£7,475) - at their current levels.

The government is set to introduce a new earnings trigger for auto-enrolment, following their review, which recommended that workers should only be auto-enrolled once their earnings rose above the income tax threshold (£7,475). They would still pay contributions from the bottom of the earnings band.

However, the TUC argues that women would be the main losers from the new earnings trigger as the vast majority of workers with pay between the lower limit of the earnings band and the income tax threshold are women working part-time. The auto-enrolment trigger should therefore be frozen, says the TUC.

The TUC believes that linking auto-enrolment with the income tax threshold is particularly damaging given the coalition plans to increase it to £10,000.

A TUC analysis of official earnings data shows that the new earnings trigger could eventually stop around two million women from being auto-enrolled into pensions.

The opportunity to benefit from employer contributions remains the single biggest reason for people to stay ‘auto-enrolled’ in new workplace pension schemes, according to latest research from the Association of British Insurers (ABI).

The ABI consumer survey suggests the introduction of auto-enrolment from October could not come fast enough for many as a way of bringing them out of the ‘savings stalemate’. Not missing out on employer pension contributions (47%) and on tax relief from contributions (14%) were the most popular reasons encouraging people to remain ‘opted-in’ to workplace schemes. This clearly shows that people see the value of their money being made to work harder by the extra top ups they will get from their employer and the Government.

Overall, more than half (53%) of people not already in a company pension scheme say they will remain ‘opted-in’ when their employers begin automatically enrolling them in eight months’ time, and this comes before any significant promotion of the new scheme.  With a further 30% of people still undecided, we could see even more remaining ‘opted-in’ and saving for their future. 

A similar scheme in New Zealand has seen the amount of workers saving for their pension more than double, with more than half of the country’s working population now enrolled. The UK could see even higher figures as its auto-enrolment arrangements will cover all eligible workers, rather than only those who are changing jobs or just starting work.

A revised timetable for when employers of all sizes must start enrolling their staff in a workplace pension has been set out by the Government.

Large employers, those with 250 or more employees, will not face any change in the date they are due to start enrolling their staff.

This follows the announcement in November that small businesses would be given more time to prepare for automatic enrolment to help them out in exceptionally tough economic times.

Minister for Pensions Steve Webb said:

“Automatic enrolment will begin on time this October, taking up to ten million people into pension saving, many for the first time ever, and all employers will be part of it.

"We have done all we can to ease any burden on business the reforms will bring and employers of all sizes now know the date they need to start enrolling their staff."

The timetable for employers to begin enrolling their staff starts with the largest firms first, followed by medium, then small companies.

Automatic enrolment will begin in October 2012. All existing firms will have enrolled their staff by April 2017, followed by all new employers by February 2018. This new timeline means that 70% of individuals will be automatically enrolled before the next general election.

The level of pension contributions will be phased in over time to help employers and individuals adjust. Full contributions will have to be paid from 1st October 2018.

A consultation and draft regulations with more detailed information will be published shortly.

The number of businesses that have closed their final salary pension to all of their staff has jumped by a third, the National Association of Pension Funds (NAPF) has revealed.

Its latest Annual Survey found that almost a quarter (23%) of pension schemes are now shut to both new staff and to future contributions from people who were already in the pension. This is up by a third from 17% in 2010, and was just 3% in 2008.

The survey shows more change is inevitable. Among those pension schemes which are closed to new staff but still open to existing staff, 30% expect to close the pension altogether in the next five years. They plan to then move staff into a ‘defined contribution’ pension, where the employer is exposed to much less risk.

Meanwhile, one in ten (11%) say they will keep the existing defined benefit pension scheme structure, but will make it less generous. This could include changing accrual rates or moving from a final salary to a career average structure.

The findings reflect an escalation in the decline of final salary (or ‘defined benefit’) pensions, as schemes that have already closed to new joiners shift their focus to existing members.

Final salary pensions have been increasingly strained by rising longevity, poor investment results, and red tape. Employers have been closing these pensions to try to manage risks and mounting costs. Only 19% of private sector schemes are now open to new joiners, compared with 88% ten years ago.

The Government has confirmed that automatic enrolment will begin on time in autumn 2012 and all employers will remain in scope.

New research among 45-65-year-olds by Standard Life reveals having children living in your household can have a big impact on your retirement decisions. Almost half of respondents (49%) with two children in the household have no financial plans to provide for the future, compared to just over a third (35%) without children.

The Pensions Bill, which will provide help for firms to automatically enrol staff into workplace pensions from next year, has now received Royal Assent and become law.

One in three people (31%) accepted a new job with no idea about whether it came with a pension, meaning they ignored a benefit that’s typically worth thousands of pounds a year, the National Association of Pension Funds (NAPF) has warned.

A recent report has detailed new research into the measures that need to be taken by government, employers and industry to ensure the plan for pension auto-enrolment is a success and make it easier for more people to save enough for their long term future.

The first issue of the Friends Life Workplace Savings Index has revealed that women in most age groups have seen their pension contributions cut year on year.

More than a third (35%) of British adults who are yet to retire have stopped paying into their pension pots, according to new research by Prudential.

The Scottish Widows Workplace Pensions Report 2011 reveals that positioning the workplace pension as ‘deferred pay’ could help improve employee engagement and increase awareness of pension benefits. Only 55% of those already in a Defined Contribution (DC) scheme know what they contribute, a clear sign that encouraging adequate contributions remains a challenge.

The Government has published consultations on pension contribution increases for civil servants, teachers and NHS staff for the financial year 2012/13. The increases are broadly equivalent to those expected under the ‘cap and share’ arrangements agreed with Unions in the Pre Budget Report 2009.

The Pensions Regulator has published a response to its industry discussion paper on the regulation of defined contribution (DC) pensions.

If you are in your fifties, pension planning has never been so important, which is why there are a number of steps you should take to improve your pension prospects if you discover you have shortfall. Planning for retirement is one of the biggest financial challenges people face and the one you can least afford to get wrong.