Professional December 2017/January 2018

Pension news

Pension news

Pension blackspots ANALYSIS BY the Trades Union Congress (TUC) shows that in some industries, like hospitality and agriculture, six in ten workers are not enrolled in a pension with many missing out on a decent retirement because they earned less than the level of earnings at which their employer must enrol them into a workplace pension. Despite the success of automatic enrolment, nearly 9,000,000 UK workers are still unable to save into a pension scheme.

Salary exchange, pensions, NLW MUTUAL INSURER Royal London’s director of policy, Steve Webb, has written to the secretary of state for Business, Energy & Industrial Strategy, Greg Clark MP, calling for a review of the rules. Steve Webb said: “Given that the Treasury has specifically decided that employer pension contributions should continue to benefit from salary sacrifice arrangements, it seems unfair that lower-paid workers are currently missing out. National living wage [NLW] legislation was designed to benefit lower-paid workers and it is doubtful whether the interaction with salary sacrifice was seriously considered when the legislation was drawn up. Having written to the government about this issue I hope that they will change the rules and allow lower-paid workers to share in the benefits of these arrangements”. The number of workers affected by the NLW is rising rapidly with the Treasury estimating that around 2.9 million workers will be on this rate by the year 2020. worried about their retirement’s financial security is 56%/46%. Households with children are also feeling the strain. One in four parents (24%) do not expect to have any savings or inheritance by the time they retire; and 29% are worried their retirement savings won’t go far enough. Eleven years from pension crisis ACCORDING TO Learn to Trade, a forex education provider, the UK will be facing a pension crisis by 2028, as the majority of ‘Gen X’ approach retirement age without a pension pot that matches the cost of living. The new research has found 43% of those age 35–54 who don’t have a private pension are resigned to never having enough money to put into a pension, with 11% of the same age group confident their savings mean they will be financially secure throughout retirement. Just 4% of those without a private pension are confident that the state will support them in retirement. Over 56% of the working class who aren’t retired are not saving in any way for retirement versus just 34% of the middle class. Cost of living is more of an issue for the latter, with more of those without a private pension saying their cost of living is currently too high for them to pay into a pension. Some 47% of non-retired women are not saving in any way compared to 39% for men. They are also more likely than men to have given up on having a private pension (30%/26%) and are also hit slightly harder (24%/22%) by cost of living in relation to their ability to pay into private pensions. The divide between non-retired women and men being

The five industries with lowest level of pension cover

Number / % of workforce without pension

Agriculture, forestry and fishing

93,000 / 65.4

Accommodation and food service activities

908,000 / 59.5

Other service activities

270,000 / 55.7


493,000 / 50.5

Arts, entertainment and recreation

253,000 / 48.2

The TUC also found evidence of a ‘pension lottery’ among those saving into a workplace pension. In low-paid sectors, like wholesale and retail, nine out of ten savers received contributions worth less than 8% of salary from their employer but in industries like financial services (where there are more high earners), the vast majority of savers received more than 8% in contributions. TUC general secretary Frances O’Grady said: “We urgently need the government to help more low-paid workers join schemes. And ministers must set out a plan for increasing contributions from employers.” Research commissioned by the TUC has also shown that a typical worker could be £5,000 a year poorer in later life if they retire after a bad year for pension funds rather than in a good year. Analysis of historic investment returns by the independent Pensions Policy Institute found that a pension saver’s pot size can vary by up to 40%, and it’s just the luck of the draw.

One in four employers miss staging date FIGURES RELEASED by Aviva for the period July, August and September this year (see row ‘Q3 2017’ in the table), show that of those businesses applying for their workplace pension scheme with Aviva: ● 25% did so after their statutorily prescribed automatic enrolment staging date, and ● 56% (i.e. sum of values in cells at end of columns two and three) set up their workplace pension at the last minute.


| Professional in Payroll, Pensions and Reward |

Issue 36 | December 2017/January 2018

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