2009 Year of the ‘Baby Gloomers’
So much happened with regards to pensions in 2009 it’s difficult to know where to start. In a year dominated by one financial crisis after another, headlines included:
- Reductions in the size of defined contribution pots due to falling share prices
- More companies looked to reduce their defined benefit liabilities by closing or restructuring their schemes
- High earners were hit with a reduction in the tax relief on their pension contributions
- Bank employees pensions were bailed out by Government using public money
- The gap between private and public sector pension provision became ever wider
- The UK state pension was frequently described as ‘the worst in Europe’ when it was once right up there amongst the best.
The constant stream of bad news meant that the much mentioned Baby boomers became very worried. They worried about how falls in their retirement income will affect their ability to support their elderly parents and their children. So worried are they that a new phrase emerged… ‘baby gloomers’.
But it hasn’t been all doom and gloom…
Pensions reform – now to 2012
Auto-enrolment for millions…
Industry bods like me eagerly awaited the release of draft regulations dealing with the finer details of pensions reform, including the new employer duties due to start from 2012. As mentioned in previous articles these new duties will, for the first time in UK pensions history, require employers to automatically enrol millions of eligible employees in a workplace pension scheme.
However it’s not just about Personal Accounts.
To aid with this reform a new pension scheme, currently known as ‘personal accounts’, is also being created. Almost daily, both the financial and popular press run stories about whether this scheme will go ahead or not in its current form.
One of the unfortunate aspects resulting from such press coverage is that new employer duties are being closely linked with personal accounts, thus giving the false impression that auto-enrolment might not happen. If there’s one lesson to be learned from 2009, it’s that auto-enrolment has support right across all the main political parties. Personal accounts however may not. Consequently auto-enrolment is far more likely to happen.
It should be remembered that this feature is just one part of a pension reform package that includes fundamental changes to the basic and state second pensions.
What the future holds for employers
In the coming year, employers will need to know what auto-enrolment means for them.
They’ll need to…
- Be aware of the impact that their new duties will have on their business.
- Analyse current pension provision to ensure that it at least meets the minimum requirements. If there is no scheme in place, they will still be required to auto-enrol their eligible employees into a suitable plan and in doing so will have to decide if they want to set up their own private workplace pension scheme, or use the basic personal accounts scheme.
Where Independent Financial Advisers (IFAs) fit in
The problem is pensions are complicated and employers will need help. The good news is that there is a group of professional people who have all the knowledge and expertise to help them. They’re known as IFAs. If you want anymore information on any of these topics just drop me a line because I’ve been one for over seventeen years now! You can call me free on 0800 321 3508
Until next time, have a prosperous beginning to 2010.
