Pensions

Pensions
Pensions have changed significantly over the last few decades. Sadly the days of generous final salary arrangements are all but behind us. These days, you are much more likely to have a defined contribution, or money purchase arrangement. This works by the employee giving a fixed percentage of their income to be invested by an insurance company. The insurance company typically has a range of funds that the employee can invest in so that they can get a return on their investment. And this is how the pot will hopefully grow so that the employee can eventually retire. So instead of getting a guaranteed income (Final Salary), you instead make a guaranteed contribution (Money Purchase). The hope is that this contribution will grow to make a big enough pot at retirement.
Pensions Automatic Enrolment
At the turn of the last decade, the Government became concerned that people weren’t saving enough for their retirement. This led to the introduction of Pensions Automatic Enrolment in 2012. Employers are now required to enrol their team into a pension subject to qualifying criteria. These criteria are a minimum salary of £10,000 a year and the employee should be between 22 and 65 years of age. Employees can opt out if they want to but organisations have to re-enrol them every 3 years. Opt out rates run at about 7-8% so most people stay in once their are enrolled. However, with savings rates still on the low side, the need to save is still there. The current level of pensions savings is 8% of salary. Required savings rates are somewhere north of 12%. The Government has not indicated any further increases in the minimum level of contributions.

Mind the benefits gap (2 min read)

According to the attached article, two thirds of SME bosses believe that they face a benefits gap in comparison to larger employers. The research, carried out by Opinium in March 2018 among 508 decision-makers at organisations employing between 50 and 299 staff, found that 69% of senior managers believe they have a duty to provide benefits beyond pensions. …

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