Employers ill-prepared for pension reforms
Only a quarter of private sector workers are saving through a workplace pension today – down from a third five years ago – while fewer than half of employers understand the key features of incoming pension reforms, two new surveys show.
The first survey, conducted by the National Institute for Economic and Social Research, found that awareness of the reforms, which will require employers to enrol almost all workers in a pension savings scheme to be phased in beginning in October, was particularly lacking among smaller employers. Just over a quarter of these were aware that they would have to make minimum contributions to their workers’ pensions as well.
The second, conducted on behalf of the UK’s Pensions Regulator, found only slightly greater awareness of the new requirements among smaller employers, who are among the last group that will be required to comply with them.
“These figures paint a bleak picture,” said Joanne Segars, chief executive of the National Association of Pension Funds. “Far too few workers in the private sector are saving into a pension, and the risk is that they will spend their old age struggling to get by on the state pension alone.”
From October, the nation’s largest employers – many of whom already offer pension savings – will have to begin enrolling all their workers in a retirement scheme unless the worker specifically asks not to be included.
The new rules are to take effect at a time of steadily declining pension savings – raising fears that retirement will place an undue burden on taxpayer funds as the percentage of the population deemed too old to work rises.
Ms Segars said the new rules could bring more than 8m new savers into a pension scheme, but added that more needed to be done.
“Our society simply isn’t saving enough for its old age, so we have to ensure that these landmark reforms are a success,” she said. “Employers have a key role to play.”
The two surveys point to potential weaknesses in implementing the new retirement savings regime. The Niesr survey, conducted on behalf of the Department for Work and Pensions, found that about half of all employers, when asked to choose which of a list of four statements best described their preparations, admitted that they “had not thought about them at all”. Another 37 per cent said that while they had thought about them, they had not done anything at all.
That survey did find employers aware of one feature of the new rules; almost three-quarters said they expected their costs of contributing to pensions to rise. Of these, 25 per cent said they would absorb the additional expense through their profit margins.