Last year saw a record number of people investing in their pensions, however, the focus for 2018 will most certainly be on increasing the amount being saved.
In April this year auto enrolment minimum contributions will increase from the current 1% of an employee’s wages from both the individual and employer, to 3% from the employee and 2% from the employer. While this doesn’t sound like much, an increase of 200% for the employee could see a rise in the number of people opting out of workplace pension arrangements. I sincerely hope this doesn’t happen and encourage people to make 2018 the year they get to know their pension, understand that with tax relief saving for a pension is not as costly as you may first think and for individuals to be aware as to what their retirement income will be like if they continue saving what they are.
Employers too need to take charge and educate their staff so everyone understands and can work together for a brighter, more prosperous future.
I wonder whether we may see a repeat of the personal pension scandal of the 1990s when individuals were, wrongly, told to opt out of their employer’s scheme and join a personal pension arrangement with most being worse off as a result. Recently, it appears that a few individuals may have been ill-advised to transfer defined benefits to defined contribution arrangements, and there may be a backlash over this inappropriate guidance in the coming months.
The Government’s White Paper on the future of defined benefit schemes looks set to be released in the Spring. I don’t envisage any immediate big changes but there may be more powers for the Pension Regulator allowing it to flex more of its muscle in relation to underfunded schemes. Also, will this year be the year the government tinker around with the tax relief individuals receive on pension contributions?
It will also be interesting to see if the investment markets, that have been the silver lining over the last few years for many pension savers continue to perform as well as they have done over the last few years. I do hope so.
Stuart Price, Partner and Actuary at Quantum