Are you putting enough aside for your retirement? Perhaps, you only think about it when you see the breakdown of your payslip at the end of the month. Or maybe not at all.
It goes without saying that we should all want well-funded and secure retirements. The small number of high-profile pension scandals in recent years may put some off, but we shouldn’t lose sight of just what a fundamental part a stable and sustainable pension scheme plays as we enter our later years.
The good news is that more people are saving into a pension than ever before and a new survey by the CBI & Scottish Widows finds that employers are near unanimous in their view that there is both a business and moral case for providing a competitive workplace pension. In fact, businesses continue to contribute billions of pounds each year into workplace pensions – and are happy to do so.
The auto-enrolment scheme – whereby staff are now automatically included in their workplace pension, with the choice to opt-out – has been a runaway success and must be built on. Auto-enrolment has led to 10 million workers saving more for retirement, and employers’ support going further.
It’s gone so well in fact that employers support the targeted extension of automatic enrolment to even more workers. 74 per cent of businesses want to see it made available to the self-employed and those earning less than £10,000, allowing for more part-time workers and those with multiple jobs to better save for their future retirement. This would help reflect some of the growing developments within the labour market over recent years.
More than seven in ten businesses (71 per cent) believe that for their employees to have sufficient levels of retirement income, employers will need to make higher contributions to automatic enrolment schemes at some point in the future. However, they do not believe now is the right time given the very recent changes that are only taking effect now.
Instead, the vast majority of business leaders (93 per cent) believe that businesses should focus on improving employee engagement with their pension savings to boost voluntary contributions. Increasing staff engagement with their savings is a must. People need to be informed and be spurred into action to show greater interest in the performance of their own pots.
However, there is also a growing concern from businesses about the essential balance between funding defined benefit schemes and investing in the future. More than eight in ten (81 per cent) believe that the government should offer more support to employers sponsoring defined benefit schemes who are struggling with costs but want to keep funding it.
This is consistently high across firms of all sizes and sectors and two thirds of business leaders reported that the costs of defined benefit schemes impact their ability to invest in capital to boost growth and productivity. Two thirds also reported that defined benefit schemes impact their investment in people and skills.
It will be important for the government to take steps to help firms who want to continue to sponsor these schemes. In the end ultimately, a strong solvent employer is the best security for a pension scheme.
So, the outlook for the future of pensions is a mixed bag. Much to celebrate in the success of auto-enrolment, but plenty more to do. Working together, businesses and government can set a path that continues to boost the number of workers saving for their retirement, and indeed the amounts that they are putting aside hoping for a retirement nest egg that lasts.