The UK economy is set for a challenging few decades; the non-existent culture of saving, an ageing population, and a huge government deficit means there is a real chance that today’s generation could experience a lower quality of life than that enjoyed by their parents. As a result, there is a serious need to promote a savings culture in the UK. Households must become less reliant on the state to help them in retirement and more and more of us must prepare to contribute significantly more to our pension pots in order to maintain the same quality of life. To ensure people begin saving for their retirement as early as possible, the UK government has introduced automatic enrolment, a new law that requires all employers to enrol their workers into a qualifying pension scheme, to take advantage of employer contributions and tax relief.
As the staging dates for automatic enrolment fast approach, employers must begin preparing for the vast number of requirements set out by The Pensions Regulator to ensure compliance. For those employers that have not already chosen a scheme to manage auto-enrolment, the choice and complexity around the topic has added further burden in a time of economic stress and uncertainty. Research by JLT has found that many employers are yet to finalise their qualifying pension scheme, leaving less and less time until the deadline and the need to make this important decision. The delay in the phasing of auto-enrolment created some uncertainty leaving many smaller employers even more disengaged with the subject. Businesses require simplicity and clarity in these times; auto-enrolment must be easy for businesses to implement so that no unnecessary costs are incurred.
Auto-enrolment is a progressive idea devised to address the issue of poor pension savings in the UK. If successfully implemented it will change the lives of future pensioners as well as the UK pensions landscape as a whole. The key players in ensuring auto enrolment is a success are the policy makers, , the employers who need to focus on selecting the right pension scheme for their employees, and the pension industry which is facing a selection of new challenges including increasing competition, new regulations, difficult markets and a general distrust in pensions.
There are many challenges around the implementation of auto-enrolment but one key area of struggle will be engaging workers in the process; Aviva found 68% of employees were unclear about the forthcoming changes to the pension system. At the heart of the pension system reform is a need to engage with those who are not saving for their retirement. With this in mind, it is vital to ensure auto-enrolment is jargon-free, uncomplicated and reliable to help build a stronger savings culture.