In the UK, new financial laws have shaken up the way people save money for their retirement. Auto enrolment in pension schemes has been made mandatory for businesses of all sizes and will be phased in over the next 5 years. This scheme has been in effect for a year now, and it has created over 1.5 million savers through pensions. Around 9% of employees have chosen to opt out for now.
Enrolment4u.co.uk explains that the scheme specifies that employers have to offer pensions to employees and those in low paying jobs should sign up. All eligible workers are expected to be part of the scheme by February 1st, 2018. Some of the basic criteria include the following: at least 22 years old, earning £9440 or more and have been on the job at least three months.
Many people are choosing to opt out of the auto enrolment in pension schemes. Some reasons cited include being behind on their mortgages and not being able to keep up with other debt payments. But enrolling in these scheme offers young workers a lot more, as they have enough time to build up a nest egg. Older workers find it difficult to increase their contributions, as they have relatively less time and other options available.
There are costs associated with this scheme, such as:
• payroll costs such as processing fees, assessment costs and putting new software in place
• assessment costs, if they are not already a part of payroll
• pension contributions from employers
• communication fees
• helpline expenses
• additional costs related to managing the Opt in/Opt out process through the Human Resources Department
• financial advice for employees
• implementation costs
Costs will vary from company to company depending on the number of employees they have and the amount of work that has to put in to set up the system. Financial experts are taking a wait-and-watch attitude to the process. They hope that this scheme will help more people have a decent retirement income.
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