Private sector pensions vanish
So what's going on, and what can be done?
No pensionMost of those who fall through the cracks work for a small business. The most common reason businesses gave for not running a scheme was that they were too small and that pension provision would be too expensive. These firms are struggling through the recession, and their priority is to get through the tough times without going to the wall. Pensions are deemed a luxury they cannot afford.
As a result, individuals are being left to their own devices, and overwhelmingly they are doing nothing. When you consider the fact that 47% of people who are eligible for a workplace pension haven't taken advantage of it, you can see just what a mountain it is to climb in order to persuade individuals to save for themselves.
They will then have nothing to fall back on in retirement but their state pension, and while the flat rate state pension offers some hope of a meager income, those who have more than a few years until retirement are going to have to work well into their 60s and even 70s until they get a penny from the state.
Separate research from the DWP has found that almost 11 million Brits are facing inadequate retirement incomes. Minister for Pensions, Steve Webb (pictured) said: "This is a very large group of people who will face a big drop in their living standards on retirement if they do not take action now."
What is being done?The government says the answer is auto-enrolment, which it is starting to implement later this year. Under the scheme all employers will have to offer a pension, or they will have to use an umbrella scheme called NEST. All employees will be automatically enrolled in it when they join, and will have contributions taken from them without them having to give permission. A contribution will also come from their employer, and the government will top it up with tax relief. If employees don't want to be part of the scheme they will have to actively choose to opt out.
The bad news from this survey (The Employers' Pension Provision Survey) is that around half of those employers questioned had no idea that they would need to automatically enroll staff under the new legislation. Some 15% said they would wait for the deadline before doing anything to prepare, and another 19% said they would wait until just before the deadline. This could mean the start of the process is complete chaos.
From the employers' perspective the good news is that this scheme doesn't start with a bang, it will slowly be brought in over a period of years depending on how big the company is. The contributions will also be stepped up very slowly.
From the employees' perspective, however, this is not good news. They currently have no pension, and there's going to be a big delay before their employer has to offer them one. It means, therefore, that those people without a pension do not have a 'get out of jail free' card. They need to start a pension quickly, and not wait for the safety net to scoop them up - by which time it may offer too little too late.
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