Written By Craig Pritchard
Last week the Government gave their backing to two significant changes to Automatic Enrolment (AE) following a Private Member’s Bill, offering new workplace pension savings opportunities for lower earners and younger workers. Initially proposed in 2017, the changes will not be immediate but will give the Secretary of State the power to extend Automatic Enrolment with a timetable for implementation to be agreed.
Minister for Pensions, Laura Trott, stated “…this will see the government deliver on our commitment to help grow the economy and support the hard-working people of this country, particularly groups such as women, young people and lower earners who have historically found it harder to save for retirement.”
The upcoming changes to Automatic Enrolment were announced as follows:
- The minimum age to be enrolled is to be reduced from 22 to 18 years of age – which is a great way to encourage young workers to start saving for their retirement.
- The Lower Earnings Limit applied to Qualifying Earnings will be removed, meaning the first pound of employee income is pensionable as opposed to starting at £6,240 per annum currently.
The changes are welcome and expected following the 2017 review – which we have been discussing with our clients already in recent years – but there will be financial implications for employers and employees.
For schemes using Qualifying Earnings as the definition of pensionable pay, the removal of the Lower Earnings Limit will mean that the employer must fund an additional £187.20 per annum on the behalf of each employee within the workplace pension scheme. Employees will also see an increase as they will have to fund an additional £312 per annum before allowing for Income Tax Relief and possible National Insurance savings if salary exchange is used.
Although not confirmed at this stage, we would expect the removal of the Lower Earnings Limit to be phased in over time due to the additional financial cost for employers and employees during the cost-of-living crisis.
Our Independent Financial Advisers have extensive experience advising on, implementing and managing a full range of Workplace Pension Schemes for a wide range of businesses varying in both size and industry. Whilst Workplace Pension Schemes are a legislative requirement, it is essential that such schemes not only meet your objectives and obligations as a business but are also on budget and deemed competitive to current and future workforce.
Retirement planning is fundamental to any financial plan, no matter what stage of life you are at. It may be that you are just starting to seriously think about how much income you will need in retirement, or you could be at the point where you need to make decisions about drawing down on your pension. Our Independent Financial Advisers can also support individuals with their pension and retirement needs, as part of their wider financial plans.
If you have any questions regarding these changes or require support and advice as an employer or employee, please do not hesitate to get in touch with one of our Independent Financial Advisers on 0117 450 1300.
Written By Craig Pritchard
