Latest news with #autoenrolment
Telegraph
5 hours ago
- Business
- Telegraph
Savers risk falling £700k short of a comfortable retirement
Britons are facing a £700,000 pension shortfall as the cost of a comfortable retirement rises, analysis shows. An earner on an average salary of £35,000 starting out in the jobs market today would need a pension pot of nearly £1.2m in 40 years' time to be able to retire comfortably, according to the Pensions and Lifetime Savings Association (PLSA), a trade body. However, with 8pc pension contributions – the Government's minimum auto-enrolment level for private sector workers – employees will be left with a retirement nest egg of just £460,000, leaving a deficit of £740,000. This shortfall has risen by £100,000 from £640,000 last year due to an increase in the estimated cost of affording a comfortable retirement. Under auto-enrolment rules, employees put at least 5pc of their salaries into a pension, in addition to a minimum 3pc employer contribution and government tax relief. But experts have warned that Britain faces a 'pension savings crisis' as the current minimum contribution level is not enough to fund adequate retirements. The figures are based on data from the PLSA showing that a single person who owns their own home will need an annual post-tax income of £43,900 for a 'comfortable' retirement this year, up from £32,800 in 2020. A 'comfortable' retirement, defined by the PLSA, includes £150 a week to spend on groceries and meals out, £1,500 a year for clothing and footwear, and an annual fortnight-long four-star holiday in the Mediterranean. The same worker would need a pension pot of £729,000 to achieve a more modest standard of living in retirement, with a smaller budget for household bills, food, holidays and property maintenance. But pension contributions equal to 8pc of their salary would still leave them with a £270,000 deficit when they come to retire. The analysis assumes 5pc investment growth net of fees, and 2pc growth in yearly contributions and inflation. Industry insiders expect the Government to examine auto-enrolment rules in stage two of its Pensions Investment Review. Chancellor Rachel Reeves has previously considered copying aspects of Australia's far more generous pension contribution system which would force employers to pay more into employees' pots. By 2040, the incomes of almost three million pensioners will no longer be enough to cover their needs, according to separate analysis by the PLSA. The Conservatives have warned that the Chancellor's plans to push pension funds into investing more in Britain will leave retirees 'worse off' in retirement by failing to make investment growth a priority. Ian Cook, chartered financial planner from Quilter Cheviot, said: 'Far too many people are sleepwalking into a retirement that may fall well short of the lifestyle they hope for. 'Auto-enrolment has been a real success in getting people saving, but it's increasingly clear that the current framework may no longer be fit for purpose if we want people to build up the kind of pension pots they'll truly need.' Myron Jobson, of Interactive Investor, said: 'The latest PLSA data underscores a simple but important truth – the cost of maintaining a decent standard of living in retirement doesn't stay still. 'The report offers a useful benchmark for what a 'comfortable' or 'moderate' retirement might look like in today's terms. But it's important to remember that retirement planning isn't one-size-fits-all. That's why these standards should be seen as a guide rather than a rulebook. 'Everyone's circumstances are different – from housing and health to lifestyle and family support. The key is to plan early, revisit regularly, and build in some flexibility to weather life's inevitable changes.' A Department for Work & Pensions spokesman said: 'Hard-working people deserve security in their retirement, which is why this week we introduced our Pension Schemes Bill to boost the pension pots of 20 million pension savers. 'We are determined to drive costs down and returns up on workers' retirement savings, with bigger and better pension funds also driving long-term investments in the UK to boost economic growth – delivering on the Plan for Change to put more money into people's pockets.'
Irish Times
a day ago
- Business
- Irish Times
Auto-enrolment needs to be more user-friendly for bosses and workers, recruitment firm says
Short-term and seasonal workers should not be dragged into the State's new mandatory workplace pension scheme, a leading recruitment group has said. Excel Recruitment says the Government should use the delay of several months to introduce the My Future Fund auto-enrolment (AE) scheme to make it more user friendly. As planned, anyone aged 23-60 and earning in excess of €20,000 a year will be automatically enrolled in the scheme on day one of their employment. Eligibility will be assessed based on gross earnings over the previous 13 weeks across all employments. 'The current AE design risks dragging short-term or seasonal workers such as those hired for the Christmas period into a scheme that won't meaningfully benefit them, while saddling employers with unnecessary red tape,' Shane McLave, managing director of Excel Recruitment said. READ MORE He is calling on the Government to adopt the UK model where employers may postpone enrolment for up to three months. Employees have the right to opt in with contributions from the employer starting as soon as they do so. 'That way, the right people are enrolled, and employers aren't forced to carry an administrative burden for no reason,' Mr McLave said. He also wants seasonal employees to have the right to opt out in the first month rather than having to wait six months as per the current proposal. 'The success of this scheme will hinge on how it's implemented,' the recruitment firm boss said. 'A rigid, one-size-fits-all system will only lead to confusion, wasted resources and a loss of trust in the scheme.' More broadly, Excel says the latest delay in introducing auto-enrolment signals a worrying lack of readiness. Mr McLave also criticised the State's lack of infrastructure to support employers or workers in understanding AE. 'We're seeing yet another major employment reform being rolled out without the tools and services to support it. There is no regulated advisory body in place to answer workers' questions, and employers are effectively being asked to step into that role without training, legal cover, or authority. That is unacceptable.'
Times
5 days ago
- Business
- Times
Pension pots worth less than £1,000 to be automatically merged
The government has promised to help pension savers by automatically merging smaller retirement pots of £1,000 or less accumulated over their working life, but it could be years before the changes are made. In its Pension Schemes Bill, published on Thursday, the government detailed plans to tackle pension schemes that were delivering poor returns for savers and create 'bigger and better' funds. But some of these measures are not expected to take effect before 2030. Concerns have also been raised that the bill does little to address the issue of millions of people not saving enough for retirement. It is hoped that merging smaller pensions will reduce costs and complexity for savers who have built up numerous pots. Scottish Widows, a pensions firm, estimates that the average worker has 11 pension pots at retirement, but those who have changed jobs more frequently can have far more, especially since auto-enrolment was introduced in 2012.
Yahoo
03-06-2025
- Business
- Yahoo
What is the Pension Investment Review?
Last week saw the publication of the Pension Investment Review which outlines government's ambitious plans to boost growth both to the UK economy and improve people's pensions through a number of mega funds. The idea behind it is that the UK defined contribution pension market is too fragmented, which doesn't deliver the best value to members. To combat this, the government wants to make sure pension funds are big enough to provide economies of scale. Its plan is that any pension provider offering auto-enrolment workplace pensions to a number of employers must have at least one big "default" arrangement. The default is the fund you end up in if you don't make any investment decisions. The minimum size of this fund is to be £25bn. This will apply from 2030. Read more: Should people keep working until later in life? However, there is some wiggle room in that schemes worth over £10bn that are unable to reach the minimum size requirement by 2030 can continue to operate, as long as they demonstrate a clear plan to reach £25bn by 2035. The view is that this consolidation will help schemes become more efficient and drive down costs. These larger funds will also boost investment in asset classes such as infrastructure which have up until now only really been available to the largest investors — like the mammoth schemes seen in Canada and Australia. The government believes investing in a wider range of assets will potentially bring higher returns to UK pension savers and a boost to the economy. The numbers quoted in the report are impressive, quoting total savings of around £1bn per year through economies of scale. The government estimates the average earner could get a £6,000 boost to their pension pots at retirement from consolidation alone. Financial services company Hargreaves Lansdown believes that while scale is important in delivering better pension outcomes, it must not come at the cost of reducing competition, member choice and much needed innovation. Read more: What Pope Leo and Warren Buffett's examples show us about working and retiring This has the ability to really drive-up member engagement with their pensions, improve decision making and boost retirement incomes. There's still a lot of detail to be fleshed out and it will be interesting to see how this will be supported. If the market is to thrive, there needs to be space for smaller, innovative providers. It's a lesson learned in the retail banking market where competition from smaller challenger banks has put pressure on larger players to improve user experience and product offerings. There's a lot going on in pensions right now. For instance, the pensions dashboard continues to progress and there are also changes afoot that will enable providers to deliver more assistance to scheme members with personalised recommendations — something they haven't been able to do before. These changes also have the potential to be a game changer in terms of engaging scheme members and helping them make better decisions. The push for scale shouldn't stifle the innovation that can flow from these regulatory changes. Read more: How getting ahead on your tax return can help cut your tax bill Why it's important to plan for retirement with your partner How to plan for retirement and track your pension pot incomeSign in to access your portfolio
Yahoo
03-06-2025
- Business
- Yahoo
What is the Pension Investment Review?
Last week saw the publication of the Pension Investment Review which outlines government's ambitious plans to boost growth both to the UK economy and improve people's pensions through a number of mega funds. The idea behind it is that the UK defined contribution pension market is too fragmented, which doesn't deliver the best value to members. To combat this, the government wants to make sure pension funds are big enough to provide economies of scale. Its plan is that any pension provider offering auto-enrolment workplace pensions to a number of employers must have at least one big "default" arrangement. The default is the fund you end up in if you don't make any investment decisions. The minimum size of this fund is to be £25bn. This will apply from 2030. Read more: Should people keep working until later in life? However, there is some wiggle room in that schemes worth over £10bn that are unable to reach the minimum size requirement by 2030 can continue to operate, as long as they demonstrate a clear plan to reach £25bn by 2035. The view is that this consolidation will help schemes become more efficient and drive down costs. These larger funds will also boost investment in asset classes such as infrastructure which have up until now only really been available to the largest investors — like the mammoth schemes seen in Canada and Australia. The government believes investing in a wider range of assets will potentially bring higher returns to UK pension savers and a boost to the economy. The numbers quoted in the report are impressive, quoting total savings of around £1bn per year through economies of scale. The government estimates the average earner could get a £6,000 boost to their pension pots at retirement from consolidation alone. Financial services company Hargreaves Lansdown believes that while scale is important in delivering better pension outcomes, it must not come at the cost of reducing competition, member choice and much needed innovation. Read more: What Pope Leo and Warren Buffett's examples show us about working and retiring This has the ability to really drive-up member engagement with their pensions, improve decision making and boost retirement incomes. There's still a lot of detail to be fleshed out and it will be interesting to see how this will be supported. If the market is to thrive, there needs to be space for smaller, innovative providers. It's a lesson learned in the retail banking market where competition from smaller challenger banks has put pressure on larger players to improve user experience and product offerings. There's a lot going on in pensions right now. For instance, the pensions dashboard continues to progress and there are also changes afoot that will enable providers to deliver more assistance to scheme members with personalised recommendations — something they haven't been able to do before. These changes also have the potential to be a game changer in terms of engaging scheme members and helping them make better decisions. The push for scale shouldn't stifle the innovation that can flow from these regulatory changes. Read more: How getting ahead on your tax return can help cut your tax bill Why it's important to plan for retirement with your partner How to plan for retirement and track your pension pot incomeError in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
