Workplace pensions just got interesting again – to the outside world I mean; people like me always find them interesting.
There hasn’t been this level of focus since auto-enrolment was introduced back in 2012.
In the past five and half years, none of the predictions have come true.
The great British public have taken pension saving in their stride with more than nine million employees going through the process.
Employers have embraced it too, with around one million businesses setting up their schemes, and we haven’t seen the predicted ‘capacity crunch’ materialise.
Providers moved online, allowing smaller businesses to get a scheme in place quickly and efficiently.
But now we are facing not one, but two contribution increases in the next 12 months, first from 2 per cent to 5 per cent, and then from 5 per cent to 8 per cent.
After five years of relative calm this is going to shake things up a bit.
I know there will be much focus on the challenges over the coming weeks and months – opt out rates, affordability, inflation and so on. But it is so important that we remember the huge benefits of auto-enrolment.
Tax relief, employer contributions, investment expertise, a charge cap – in other words, AE pensions have a huge amount to offer. All you have to do is stay opted in. It’s one of the rare occasions in life when doing nothing pays.
Please don’t think I’m going into this with my eyes closed. I know that in the current financial climate asking employees and their employers to put more into their pension will provide challenges.
But there are factors that work in its favour.
This first increase was pushed back six months by the previous chancellor, meaning it coincides with the new tax year.
That means pay rises, even modest ones, along with increases to the personal allowance will help offset the increase in contributions.
If people don’t see much of a change to their take-home pay then it makes the increases an easier pill to swallow.
And, of course, there is the ongoing power of inertia. People need to act if they don’t want to be in their pension scheme anymore.
The past five years have shown us that people tend not to do that.
As a country, we can’t put this off any longer.
Defined Benefit pensions are all but gone and we all must realise that our quality of life in retirement is entirely in our own hands. We can give our future-self a pay rise just by continuing to contribute, while getting a helping hand from the company we work for and from the government.
I believe auto-enrolment will come through the next 12 months in good shape, but we all have a part to play to make sure that happens.