Presentation about: Why we need to improve saving. How we can do that through the workplace. Your roles as employers.
Slide serves as a general overview of the widening savings gap. The statistics below are specific to Scotland. “ Number of pensioners will rise by half a million in 20 years” – the number of people of pensionable age will increase from 16% to almost 25% (source: National Records of Scotland, March 2012) Pension saving amongst employees is at an all time low 82% public sector 35% private sector (highest in UK outside of London) Life expectancy is at an all time high At birth – 75.8 for men (UK 78.2), 80.4 for women (UK 82.3) At retirement – 16.8 men (UK 18), 19.3 women (UK 20.6) Glasgow City is UK lowest at 71.6 for men and 78 for women, with Kensington & Chelsea 85.1 and 89.8 respectively
Shows just how under-utilised, and under-provided, workplace pensions are generally. And the circles illustrate what this will ultimately mean to a typical employee: 30% represents the likely income replacement ratio for someone on an average salary (say £25k), retiring on the State scheme and little more in terms of savings. The box underneath is to demonstrate that income replacement ratios mean nothing to most people, but shown as a lifestyle, it demonstrates how little that buys.
Brief explanation of auto-enrolment and what it means, including the fact that the employer will need to contribute a minimum of 3% of band earnings.
We carried out research to understand better the impact of auto-enrolment. 600 people in squeezed middle (incomes from £18k to £45k) interviewed. We explained auto-enrolment and what was happening, including what 8% of salary might get them as a pension in retirement. We asked if they would stay in, and if they would even consider paying more. 82% remain enrolled if: Communicate clearly Point out financial benefits Highlight employer / government contribution 33% would pay more if: Employers also increase Is it really not affordable? Don’t use peer comparison Don’t scare people Don’t talk about ‘pensions’ Two key messages: 82% said they would stay in, provided it was communicated properly and they understood the benefits. 33% said they would even pay more, when they realised 8% probably wasn ’t enough. If we get auto-enrolment to work then we can improve income replacement ratios to as much as 45%
Showing the timeline (top) and the phasing of contributions (bottom) as it affects different sizes of employer.
Provider like Standard Life will help with online tools to sort out employees into those who are eligible and those who aren ’t, taking the pain out of the admin for you.
Things you should consider
Standard Life Pension Reform Presentation
Workplace pensions and yourrole as employersECC Breakfast ConnectionsStephen IngledewManaging Director, Corporate25 April 2012
Why are workplace pensions on the agenda?• Number of pensioners will rise by half a million in 20 years• Pension saving amongst employees is at an all time low• Life expectancy is increasing rapidly Source – Annual Survey of Hours and Earnings (ASHE) 2011
However, workplace pensions are under-utilised… • Over 1 million employers don’t have a workplace pension scheme • Up to 10 million people are not saving into any pension scheme • 35% of private sector employees are currently saving into a pension • Many people on average salaries will retire with low incomesSource: Standard Life 2011 report ‘Keep on nudging’
Government reform of workplace pensions will mean…• Auto-enrolment of employees• Employers must put in place a qualifying workplace pension scheme• Legal obligation to join eligible employees and re-enrol every three years• Ongoing governance and compliance requirement• Minimum contributions will be 8% of band earnings (3% from employer)
Research suggests this could work well… 82% 33% remain enrolled would pay moreSource: Standard Life 2011 report ‘Keep on nudging’
So what does this mean for employers… Auto-enrolment start dates Q2 2014 Q4 2012 Q1-Q2 2013 Q3-Q4 2013 Q1 2014 Q3 2015 - - Q2 2015 >5000 4000-4999 500-3999 250- 50-249 <50 ontribution rates: 012-2017 = 1% employer and 1% employee 017-2018 = 2% employer and 3% employeeSource: Department of work and pensions
Who’s here to help…• DWP• The Pensions Regulator• Pension providers• NEST• Advisers
The questions you need to consider…When is your auto-enrolment date?Does your current scheme qualify?Do changes need to be made to payroll?Are there trustees you need to consult with?How many people will become eligible, and at what cost?How are you going to communicate with your employees?How will your employees respond…