People often see saving for a pension as something they can put off until tomorrow. But leave it too late and you won’t have built up very much to live on by the time you retire. So how can you start preparing now?
Research shows the majority who work in the construction sector are not currently saving into a workplace pension. Just a third of construction workers have one.
Auto-enrolment for every workplace by 2018
That is why we have introduced the biggest change to the pensions system in a century, giving up to 11m people a helping hand. A new duty was introduced in October that requires employers to automatically enrol their staff into a workplace pension.
By 2018 this will cover every workplace – from the largest to the very smallest – and applies to all workers aged between 22 and state pension age earning more than £9,440 a year.
However, anyone can opt in and it’s not always necessary to wait until your firm enrols you. Construction workers can enrol straight away if their company already has a scheme.
Start to prepare
It is a legal duty to enrol eligible workers, so check the date for your size of company at the Pensions Regulator (TPR) website.
Employers with 2,000 staff or more are now enrolling their staff. If you have fewer than 50 workers you won’t be staging until June 2015 at the earliest but the rule of thumb is to allow 18 months to prepare.
Employers should also choose a provider that’s right for them. The National Employment Savings Trust has been established as a low-cost, low-hassle option. But TPR can help answer any questions you have before you decide, and you may choose one of the many other providers in the market.
How it works
We’ve set contributions low to encourage as many people to stay in and start saving.
Initially, employees contribute 1 per cent of their gross monthly salary, rising to 5 per cent by 2018. That is matched by 1 per cent from the employer, rising to 3 per cent which makes a minimum contribution of 8 per cent.
We recognise there are some costs involved in setting up a workplace pension scheme.
But we have done much to ease the burden on employers, including staggering staging dates and an optional ‘postponement period’ of up to three months before a worker needs to be automatically enrolled. This will save businesses around £170m a year in contribution costs.
Enhancing business reputation
Offering a workplace pension can also enhance your reputation as an employer and could provide an ideal opportunity to review the existing benefits you offer employees.
Some have already seen this as a chance to help them attract and retain high-quality employees by contributing more than the statutory minimum. Others know this can increase workers’ loyalty and morale.
From posters and your intranet to letters and text messages, we have found employers can make a real difference by communicating with their workers about the pension changes.
There is material to support you with this on the TPR website. It is important to let workers know that money is also paid in by their employer, which boosts their own savings.
A million people have already been automatically enrolled into a workplace pension, and we are seeing stunningly high participation rates among some of our biggest employers.
Starting a pension can be a life-changing event, and as millions more people see the benefits, employers can rightly be proud of the contribution they will make.
Steve Webb is pensions minister