Millions start to properly fund their pension

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April 1st 2019 is a red letter day for millions of Brits auto-enrolled into workplace pensions. From today the contribution rates will at last be 3+4+1 (three from your boss, four from you and one from the Government – unless you are in a net pay scheme and not paying tax).

Not only will more of us be paying more, but many new people will enter auto-enrolment as the minimum wage rises from £7.70ph to £7,38%, an inflation busting 4.9% increase.

All this means that for most people who pay the minimum contributions into auto-enrolment, pensions are beginning to become serious.


Good timing for you and me?

Ok, the official day for the increase is 6th April but it’s April earnings that count and today’s April 1st – let’s celebrate – their is at last good news on wages and the timing for increasing pension contributions couldn’t be better.

The good news is that most of us should be seeing more money in our pocket to pay for the increased pension costs.

Screenshot 2019-04-01 at 05.51.25


Good for bosses?

When the minimum wage was introduced over 20 years ago it was £3.90 per hour. a lot of people said Britain couldn’t afford it and that we’d become uncompetitive, now with the minimum wage rising in real terms almost every year since it stands at 53% of average national earnings.

We no longer look the skinflints, we look like a country that treats the low-paid fairly

Screenshot 2019-04-01 at 06.01.28.png

Far from driving up unemployment , the minimum wage appears to have approved employment rates, we now have 3.9% unemployment. I’d argue that’s because it’s worth going for low paid jobs.

So if you’re a boss, worry not; increased labour costs do not necessarily hurt your business.

If you want to find out the small print on what you have to do to meet the new pension requirements , follow this link.


Good for the country

If Britain’s workforce is being paid more and is paying more into pensions, then the much vaunted demographic time bomb is being defused.

The wages we receive in retirement have been increasing steadily with the maturity of defined benefit schemes and the triple lock.  The mass-affluent may not get as much out of their SIPPs as they did from the old-style company pension , but pension wealth is being spread more evenly, there is unlikely going forward to be more than a small minority of us simply dependent on the state pension.

Now is a good time for us to celebrate this, and – before we lose momentum- push on.

Yes! Contribution rates should be higher than 8% of the AE band, for many people they are. Let’s hope that the minimum agewage contribution will increase beyond 8% as we go through this decade.

The appetite of ordinary people to pay increased pension contributions will be tested this month and I hope that once again, a combination of nudge and a genuine willingness to sort the agewage, will prevent a spike in opt-outs.

Meanwhile, work must go on to make the choice architecture for people who have money in DC pensions , better. I am talking specifically about the over 50s who have life changing choices ahead of them and precious little support.

If like me, you want to help these people get a proper agewage, support AgeWage!

You can do so by buying shares in us through our crowdfunding partners Seedrs, Minimum investment starts at just £16,50,(£11.55 after tax relief)

Use this link,

www.seedrs.com/agewage

 

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About henry tapper

Founder of the Pension PlayPen, Director of First Actuarial, partner of Stella, father of Olly . I am the Pension Plowman
This entry was posted in advice gap, age wage, pensions and tagged , , . Bookmark the permalink.

1 Response to Millions start to properly fund their pension

  1. Ian Neale says:

    Henry
    I hate to appear to be nit-picking, but the AE min conts step-up applies from 6 April, not today (http://www.legislation.gov.uk/uksi/2016/719/regulation/2/made).
    Kind regards
    Ian

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