This article is part of Morningstar’s Guide to Investing Ideas for 2016, click here to get your financial health in order with some new year’s resolutions for your portfolio.
Have you got a workplace pension? More than 75,000 businesses are now providing more than 21 million employees with a workplace pension, but if you have not already been auto enrolled into a retirement savings scheme, this is the year for you.
According to the Department for Business, Innovation and Skills there were a record 5.4 million private sector businesses at the start of 2015 – and 99.3% of these were classed as small businesses, with a total of 15.6 million employees. Many of these small business employees have already been auto enrolled, and now it is the turn for micro businesses of 30 employees or less. It is estimated there are 500,000 of these nationwide.
However executive director for automatic enrolment Charles Counsell said The Pensions Regulator was concerned that a minority of smaller employers were leaving their pension provision arrangments too late and would struggle to comply on time.
“We are helping employers avoid this by alerting them in good time to their duties and giving them the tools they need to meet them,” he said. “Employers should start planning 12 months before their duties start and make our website their first port of call. Not all employers will have staff who need to be put into a pension scheme but they will still have duties to tell staff about automatic enrolment and complete a declaration of compliance.”
New Flat Rate State Pension
This is also the year that a new flat rate State Pension will be introduced, and despite there being less than three months before the changes are implemented many affected are still in the dark about their new level of income.
“According to the Department of Work & Pensions, 80% of those reaching state pension age in the next few years will receive less than the headline new State pension of £155.65 a week,” warns Kate Smith, regulatory strategy manager at Aegon.
“The reality is that if people want a reasonable income in retirement they will have to take personal responsibility and save for themselves. For most, reliance purely on the State pension risks financial struggle in later life, with the new flat rate pension paying just £8,000 a year, just about covering basic living costs.”
Pension Reforms Turn One
In April, it is the paper anniversary of the reform action which means that we can all get our hands on our own hard saved cash in retirement. Has it been a success? The experts, and the public, are divided. In August, it was found that only 36% of pension holders said they’d received any information or guidance from their providers. Almost £2.5billion worth of payments were made to customers in the first three months, but whether that cash will be put to good use, securing a dependable income for life for those pension savers is another matter.
The one year anniversary will bring a fresh look at the facts and figures and hopefully provide insight from the guinea pig generation that will help inform those now approaching retirement.
