Pension reforms may lead to lower contributions
We know that we have gone on a lot this week about automatic enrolment and the impact that this will have on employers. For those of you that haven’t been paying attention we’re talking about the automatic enrolment of workers into a workplace pension scheme. It all get underway from 2012.
Here is a link to an article that the Daily Telegraph published yesterday.
You’ll see that there is a growing concern that the new rules will simply lead to cash strapped employers reducing more generous contributions down to NEST levels. Our research bears this out. We have come across two employers only recently that were paying upwards of 10% of salary to employees that joined the pension scheme.
With a pension take up of less than 30% in both cases they are worried about the huge cost of including the 70% of non-joiners in such a generous pension scheme. Both are thinking about introducing a NEST category (3% of Qualifying Earnings) to save them from that hit.
There is, we believe, a real danger that the Law of Unintended Consequences will kick in. We’ll find that although more are saving up for retirement there’s less going into the pot in total.
What do you think?