Government under increased pressure to introduce pension commission
The International Longevity Centre-UK (ILC-UK) have released a new report that details the future demographic and economic storm that we are facing. As a result, there are more pressured calls for the next government to introduce a new pension commission to help challenge the policies made in regards to the adequate saving for retirement.
The ILC-UK explain that some of the parameters for setting up a new commission are to specifically focus on:
- Defining target outcomes for retirement savings and extending working lives
- Developing a mechanism to regularly monitor progress against these targets
- Consulting and ultimately deciding on whether new policy reforms are needed
The ILC-UK estimate that women are expected to live for more than 25 years in their retirements and men around 20 years. This is due to the increased life expectancy which has increased by almost 30% between 1990 and 2020.
In addition to this, the government are also making vast reforms to pension legislation. The recent auto enrolment workplace pension reform was the latest in a series of changes that is still yet to affect millions of people working in the private sector. The report by ILC-UK explains that while the initial stages of auto enrolment have been deemed a major success (only a 12% opt out rate), the uncertainty now comes with how small and micro businesses are going to cope with meeting their auto enrolment duties.
With over 46,300 businesses set to stage in 2015 alone, the fear is that opt out rates will increase; especially with the minimum contribution rate rising to 8% by 2015 (with a 3%/5% split between employer/employee contribution).
This uncertainty leads to further fears that the amount that people are saving for extended retirements is still going to be at an inadequate level and the ILC-UK think that introducing a new pension commission to help tackle these issues is extremely important after the upcoming governmental elections.
The ILC-UK also think that due to life expectancy increasing, the proposed measures for the State Pension Age (SPA) increasing don't suggest a fast enough adaptation. The ILC-UK suggest a slightly different calendar of increase to the government because they think that the importance of increase the SPA is to ensure that people spend the same amount of time in retirement on average, with the current increase of life expectancy. The government project the SPA to be 69 by the late 2040s.
The Office of National Statistics (ONS) principle population projections for the UK; under a plausible scenario where life expectancy rises faster that currently thought, SPA could even reach 70 by the late 2030s.
From this, the importance in the short term is to focus on auto enrolment and to encourage workers to stay enrolled. The education for small and micro businesses is also extremely important because with a number of different reforms and changes that have happened over the past few years, confusion is likely to be high, especially among SMEs.
IRIS have a number of extremely helpful guides and online seminars that you can take advantage of in order to ensure that your auto enrolment process is a streamlined as possible. As an employer, your employees will look to you for help and guidance as well as questions on auto enrolment and the reasons that they are being auto enrolled into a pension scheme. It is important to stay compliance as well as become knowledgeable about the process and the legislation; another aspect that IRIS can help you with.
Find out more about IRIS training for auto enrolment, online seminars about how to streamline your auto enrolment process and guides that detail your responsibilities as an employer: