Pensions reform is now having a major impact.
New rules designed to resolve the UK’s pensions savings crisis are having a major impact on employers and employees alike following the introduction of reforms in October 2012.
Automatic enrolment began in October, starting with the largest employers. Unless they specifically opt out workers will automatically join and pay into their employers’ staff pension schemes. This could be an existing scheme or new scheme to which the employer will also contribute. The Government will also contribute by way of tax relief on employees’ contributions. Smaller employers and newly formed businesses will have until 2016/17 to comply.
Pensions can seem a confusing subject, full of financial jargon and complicated rules, and the new reforms provide much food for thought. Certainly for employers, a proper strategy is going to be essential and most large scheme advisers consider that planning should already have started. The project will require a specialist manager and team.
Employers should be mindful too of the requirements and restrictions of the Financial Services Act. They may invite an adviser to present to staff, and there is no problem in giving staff information that includes no recommendation or advice. In addition, there is no problem recommending that employees join a scheme to which the employer contributes. It is vital that the employer informs the employee that advice is available from a financial adviser, and the employer should take no financial reward for establishing a scheme.
For employees, it is important to remember that your life in retirement is going to be very different from your working one, both personally and financially. Outgoings are likely to be lower, but you may want to spend more money on leisure activities. Retirement is like a holiday – but every one of your retirement years has to be paid for. That is why it is essential to seek professional advice and start planning for retirement now, whatever your age, to provide an income that is going to see you through potentially many more years than those enjoyed by previous generations.
For automatic enrolment, employers will have to choose a pension scheme, perhaps an existing one or a scheme set up with a pension provider.
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