There is a huge debate over auto-joining pension schemes. If you are an employer, and you set up a pension scheme for staff, do you want them automatically enrolled or do you want them to sign up.
You can see the pros and cons from the employer’s side-
- If you set up auto join, everyone goes in, so you don’t get a huge amount of hassle explaining the scheme to members and financial advisers around your work place while staff take time to think about whether they join or not
- At the same time, maybe it is good for them to reflect on the generosity of their employer contributing to their old age. So many benefits are just a “given”- maternity pay, holidays, getting away before 9pm. Taking just 5 minutes to opt in sounds like a good thing
- But then, if you auto enrol them, then you have to pay for them, whether they would really have joined. Younger staff would perhaps just take the money and spend it. One of my colleagues cashed in a final salary scheme for his first decent guitar. He reckons he did the right thing.
- What about short term and temporary contracts. More red tape and hassle for employers.
From the staff point of view it is difficult to think of the downside apart from being forced to save, get tax relief and probably an employers contribution without having to even think about it.
The government has to do the balancing act. Euroland says it might breach our human rights, the UK Government says it should be brought in and is seeking ways to ensure that it is. From the government’s point of view, it will certainly pull many people out of retirement poverty who would only get their through sheer lethargy of not joining an available scheme.
Having dealt with schemes for a number of years you would be shocked at how many people don’t join a scheme that is set up and waiting. And how many people say that they had no idea that it was even there. You don’t believe them either, but you will have to bail them out in retirement, while they enjoy their extra pint today.
No comments:
Post a Comment