Government to Expand Workplace Pensions

Yesterday, the Department for Work and Pensions (DWP) published a paper ‘Analysing the impact of private pension measures on member outcomes’.

The paper confirms the government will be pressing ahead with changes to auto-enrolment in workplace pensions.

• Removing the lower earnings limit (LEL) that qualify for workplace pension contributions.  The current LEL is £6,240 meaning that earnings below this level are not included in the minimum % contributions of both employers and employers.  The new rules would mean that right from the first £1 that you earn will qualify for pension contributions.
1. Employees will build up more pension funds quicker as more will be paid in by both employers and employees.
2. Lower paid workers with earnings below £6,240 will now start to build up pensions.
3. Another ‘kick in the teeth’ for employers as another payroll cost burden that will affect all enrolled staff?
• Lowering the minimum qualification age for auto-enrolment from age 22 to 18.
1. Younger people will start to build up pensions earlier.
2. Employers will be required to enrol younger works which may encourage them not to recruit younger people.

Comment

Overall, it is a good thing for people to build up more pension funds as well as encouraging people to develop a savings habit.  That said, it may not be that easy on employers as we enter an economic slow down having already been hurt by higher costs, higher wage demands and now even more pension contributions.