Alternative to auto-enrol pensions could be needed
Sep 08 2011
Pension schemes are under scrunity with auto-enrolment criticised
The Department for Work and Pensions (DWP) is ignoring the real financial needs of workers, according to an employee benefits consultancy.
An alternative is required to the DWP’s ‘one-size-fits all’ approach of auto-enrolling employees into a pension, says Creative Benefits.
Many employees will struggle to see sense in contributing to a pension when they are saddled with expensive debt, have their sights set on house purchase, simply cannot afford the loss in income or may not get a good deal due to current means tested benefits, adds the organisation.
Creative Benefits development manager David Marlow says, ‘We believe that employers should be able to offer corporate ISAs and formalised debt repayment vehicles to their staff as an alternative to immediate pension enrolment.
‘This way the valuable employer contribution will suit employees’ needs more and in the long run will see many positively choosing pensions saving when other priorities are under control.’
Creative Benefits says that the need for more choices is highlighted by DWP forecasts that just 7.5 per cent of the eight million workers ineligible for auto-enrolment will choose to save in the National Employment Savings Trust over the long run (and just 2.5 per cent in the first year).
Marlow adds that the government is out of touch with the needs of many low earners who have rationally not taken up existing pensions on offer to them. 'With national average earnings around £24,000, 5.7 million households in the UK living off a single income and average UK household debt at £57,635, choice is absolutely vital,' he says.
Auto-enrolment is a process whereby employers automatically enrol eligible employees into a qualifying pension scheme without any action on the part of the employee, and will be coming into force next year.
Workers will be able to opt out at any time but with pensions engagement and understanding typically low amongst those most affected by means testing and debt concerns, Creative Benefits says it is 'widely anticipated that apathy will see few do so'.
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