Automatic enrolment pensions were introduced in 2012 and the final piece of the (current) jigsaw was completed in April 2019.
Final for now that is, as the Department for Work and Pensions is waiting to see the effect of the latest increases before considering its next move.
So, Stage 3, as it is called, has happened; the new minimum total contribution is now 8% of pensionable earnings of which the employer must pay at least 3%. There is no employee minimum as employees are required to make up the difference between the two – a subtle but very important difference.
There has been some press coverage but little fanfare and yet, with 10 million new people in workplace pensions, based on an average salary of £30,000, this means a further £9billion will be invested into workplace pensions in the next twelve months.
Given that so few people check their payslips any more, the effect of these increases is likely to go unnoticed by most. To view their payslip, most employees now have to log in to an account rather than look at a piece of paper from a brown envelope and most simply do not bother. Inertia rules.
The recent increase in the level of personal taxation means that the effect of these increases will be negated by about 50% in any event and thus the number of employees ceasing membership of their workplace pensions will be small.
The biggest impact will be on newcomers to the workplace – the youngest workers will be impacted most.
Hence, the importance of starting a workplace pension needs to be given greater emphasis for new employees than before – the benefits are many and the sooner anyone starts a pension, the better things will be for them in later life.
In response to this, we have produced a specific new joiner pack, designed to give simple information and help new employees understand the basics of their workplace pension and why getting started is so important.
We can help
We can review your current benefits package and put together new incentives to reward, motivate and nurture your team. Give us a call today on 01483 205890.