With a general election just a matter of months away, all the mainstream political parties have started setting out their agendas for growth and sustainability.
At the forefront of many of the political discussions are the issues of pensions, pension reform and auto-enrolment. Currently any SME with between 90 and 159 members of staff is obliged to auto-enrol any worker aged between 22 and state pension age earning a minimum of £10,000 annually onto one of the new workplace pension schemes. As Steven Glicher accountants mentioned earlier this year, any employer who fails to register for auto-enrolment pension schemes could potentially face financial penalties.
Auto-enrolment is an issue that is already of concern to many smaller employers. Many have still yet to register on the scheme.
However, the problem could be further compounded by the Labour party’s latest auto-enrolment pensions’ initiative. Labour is expected to announce plans which will reduce the earnings threshold for auto-enrolment eligibility. It is reported in the Financial Times that it is proposing to reduce the threshold from the current earning’s level of £10,000 per annum to £5,772. If these changes are introduced then an additional 1.5 million workers could potentially be automatically enrolled onto one of the new workplace pensions’ schemes during the next parliament.
The proposals were announced by shadow work and pensions secretary, Rachel Reeves. She told the Financial Times that low income workers could benefit if the proposals were to be implemented:
“With the rise in zero-hours contracts, part-time and low-paid jobs and insecure work, an increasing number of people risk missing out on the chance to save for their retirement. The government’s failure to encourage more people to save threatens to store up huge costs for taxpayers in the future with a rising benefits bill.”
Pensions’ experts have broadly welcomed the proposals, but have urged caution, claiming that they could place further burdens on SMEs already pre-occupied with meeting their existing auto-enrolment obligations. Tom McPhail, head of pensions’ research at Hargreaves Lansdown, told the FT:
“Simply lowering the threshold back down to £5,772 creates its own problems, because you then end up dealing with some very small sums of money.”
However, David White, managing director, Creative Auto Enrolment, believes that whilst these fundamental changes to the auto-enrolment system could potentially be problematic, any proposal which simplifies and streamlines the system should be welcomed:
“These proposals need some careful consideration. Our recent research has shown that auto- enrolment is causing business difficulties, with just 15 per cent of those staging in the next year feeling well qualified to deal with preparations. Simplifying the categorisation of workers will make the process easier for businesses and anything that makes it easier for employers is to be welcomed.”
“However, before we make any changes to the legislation we need to get the policy right and consider the interaction with single tier state pensions – which are currently set in the middle of this earnings band – as well as the charging structures on small pension pots.”
If you are concerned about the new auto-enrolment qualifying scheme or have any other concerns relating to pensions and savings’ planning, speak to Steven Glicher accountants.
Our accountants have close contact with a number of independent financial advisors who can offer specialist advice on pensions, life assurance, investments, critical illness cover, income protection insurance, mortgages, elder care, private medical insurance and school fees planning. For further information, call Steven Glicher accountants on 0161 485 8007.