BeeHive > BeeLines > 2008 > Dec > Moving to 2012
Moving to 2012
Another day, another DWP press release on pensions; what a year! It’s a good one this time though, there’s apparently been some research undertaken with employees who are eligible for automatic enrolment into pension saving (ie they’re not in a pension scheme at the moment) and it seems like most of them are up for it. Come 2012 nearly 70% of currently unpensioned employees see themselves saving in workplace pension schemes.
Not only that, but 64% of those surveyed in this poll thought that automatic enrolment with a compulsory employer contribution was an ‘attractive option’. And as if all that isn’t enough positive news for one day a staggering 60% of the employers who will have to pay the compulsory pension contributions seem to think that the 2012 pension reforms are ‘a good idea’.
It doesn’t get any better than that does it? If any of you would like to get the full SP on all this there’s a link here to the press release and through that you can get to the various links to the research etc.
I think something important is happening here; we’ve just seen a Pensions Act passed in Parliament that for the first time will make it the law that all employers in the UK will have to offer a private sector workplace pension scheme to their eligible employees by 2012. Those schemes will either be qualifying schemes established with pension providers by the employers or the default qualifying scheme called ‘Personal Accounts’ being built by the Government (albeit at arm’s length). Think what you’ve just read there – all UK employers will have to have a private sector workplace pension scheme in place that they are required to contribute to if their auto-enrolled employees decide to stay in it and start saving for a pension.
That’s staggering! It just has to be the best reason our industry has ever had to distribute quality workplace pension schemes to millions of employers and employees across the land. I use the word ‘quality’ there for a precise reason that I’ll come to in a minute. Not only that, but we can be assured this time that, unlike the so-called Stakeholder reforms that generated so many ‘shell schemes’ with no-one in them, we will have the very real chance that these new schemes we distribute in the run-up to 2012 will be filled with pension savers through the process of auto-enrolment.
The choice for all employers won’t be between having a workplace pension scheme and not having one as has been the case in the past, but rather whether they should have a bespoke pension scheme with their name on it and designed specifically to meet their and their employees specific requirements, or simply auto-enrol their employees into the one-size-fits-all, no-bells-and-whistles default scheme.
Bespoke pension schemes in our high-NI future will be able to take advantage of useful and very sexy design features such as salary sacrifice arrangements, modern lifestyling investments tailored to individual risk profiles and all the bells and whistles anyone could ever want (such as income drawdown) when it comes to using pension savings to provide income and security and control of assets in retirement. If in addition to, or indeed as part of that employers can be persuaded to look at providing a ‘quality’ qualifying scheme for their employees then both they and their employees will benefit from additional advantages.
This is excellent news for our industry I think. It is excellent news in particular for Independent Financial Advisers who can add far more to bringing pension saving alive for employers and employees than a million flowcharts ever could. We have three whole years before those employers who leave things to the last minute are to be faced with the choice between a quality bespoke scheme or the default scheme provided by the legislation. Plenty of time for us to do something that has been almost impossible to do for the last half century – distribute private sector pension schemes to the workplaces that up to now have been able to rely on the state second pension schemes to do the job for them through the NI system.
The days of earnings-related state second pensions are well and truly over. That’s what these pension reforms are all about. The replacement for the state second pension will be a requirement for employers to put in place private sector workplace pension schemes to be filled with auto-enrolled employees. If this survey is right then such schemes look likely to be filled with happy savers and sponsored by happy employers.
There’s plenty for us to talk to employers and employees about here as the new year of 2009 dawns. If you need any reminder of what employers might be interested in and of what a ‘quality’ workplace pension scheme is, or why salary sacrifice is about to truly come into its own, then re-reading some of these recent BeeLines over the Christmas break should do the trick:
Self-Certification for 'Good' Schemes
Employers, 2012 and all that - Part I
Employers, 2012 and all that - Part II
Employers, 2012 and all that - Part III
Employers, 2012 and all that - Part IV
Employers, Advice and Personal Accounts
The Demise of the State Second Pension
Too Rich to be Poor; Too Poor to be Rich
Redistribution, Redistribution, Redistribution…
Salary Sacrifice – It just gets better!
I know what you’re thinking “How does he write so much good stuff on pensions?” I don’t know. To tell you the truth I amaze myself sometimes…..
10 December 2008
Source: www.dwp.gov.uk
Any research and analysis has been provided by us for our own purposes and the results of it are being made available only incidentally.
The information provided is based on our current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice.
