The world of workplace pensions has changed significantly recently thanks to a new scheme that was years in the making. Some of the UK’s largest companies have recently begun the process of automatically enrolling eligible employees onto new pension schemes, which may become the norm for millions of workers in the next year or so. Pensions are vital for anyone who wants to save for their future, but many workers may feel that they don’t have the time or resources to set aside money for retirement so, in theory, the new scheme should work.
It is expected that as many as 18 million workers in the UK will be subject to auto-enrolment on such schemes, but is there a chance that the pension packages on offer from their employers might not be as they seem? Having been in planning for several years, there is a lot resting on the success of the auto-enrolment pension scheme, however there may be a possibility of something better out there for workers who want to get the most from their pension package.
The scheme has been implemented to work by workers “depositing” a certain amount each month from their wage, which will then go towards their pension package, while their employer will make a similar contribution contemporaneously. This may sound convenient, but it is not without its drawbacks. The main problem that a number of people within the pension industry have with the scheme is that, because it is new, it may be difficult to gauge whether it will succeed or fail.
At a time when many workers may be struggling to pay for the essentials, let alone a pension scheme, an auto-enrolment scheme may be problematic. Having a proportion of their wage taken away whether they want to or not might make things difficult for them in the short-term, something that pension advisors at Mypensionexpert.co.uk see as being part of the problem with auto-enrolment. Andrew Tully from MGM Advantage said that silence from some of the major stakeholders and interest groups in the scheme have led to confusion over auto-enrolment:
“The Department for Work and Pensions have yet to make a statement on their intentions for the scheme, while there are also a number of different elements at play which have made the entire issue of workplace pensions confusing for both employers and employees.”
Many experts believe that while medium and large companies with a larger workforce and larger revenue stream can afford to take part in auto-enrolment, small enterprises may not be able to facilitate this transition as easily, mostly due to the financial crisis that which engulfed the UK economy in the run-up to these reforms. One of the main limitations they face may be that they don’t have the necessary resources to guarantee employment in the foreseeable future.
To gauge whether auto-enrolment is a success, a lot of people in the know are suggesting that it should be given time before they can see how many workers have signed up. If the numbers hit anything close to 18 million, then it may be deemed successful, but anything below five million may see the scheme doomed to failure.