The next few months will see huge hardship for large numbers of people who have no financial buffer and will experience bigger food bills, higher fuel payments and higher costs to pay debt. On top of this , they will face less in their pay packets. This means that millions of people will struggle to meet regular commitments, including contributions to their workplace pension plans.
Together, these extra strains on household finances are going to mean real deprivation. It is easy for those of us who have savings and excess income to insist that people continue to save through their cash flow crisis but I am not sure that is the message we should be putting out.
I suspect that many people will be faced with stark choices about whether to make their monthly payments or meet other bills – which if not met could result in disconnection of essential services, malnutrition and the health problems that accompany not having the most basic of lifestyles. Should people risk losing their house through rent or even mortgage arrears , but pay their pension?
Is it a responsibility of our large master trusts, into which the majority of those on low earnings save, to make it clear how they can take a pension payment holiday?
Of course it is not possible to encourage people to opt-out of auto-enrolment, indeed it is a criminal offence for officers of companies to actively encourage doing so. Maybe readers will consider me offensive in even suggesting this. But I worry that many people see their pension payments as beyond their control – like income tax, national insurance and other payroll deductions.
Those responsible for staff welfare in the workplace need to be given a clear steer from their pensions department about what the law says they can say and how proactive companies can be in explaining that pension payments are not compulsory.
It makes me particularly sad to think that many who are struggling to keep their pension payments going are overpaying their pension contributions by 25% because of the net-pay anomaly which will not be fixed for another three years. Up to
1.2 million individuals, 75% of whom are women, could benefit by an average of £53 a
year from the redress arriving in 2024-5, but no help will arrive till then , nor will that help be backdated to cover over-payments today.
We cannot give advice on pension contributions but we can give guidance.
Let us remember the difference between pensions advice “the delivery of a definite course of action” and guidance “the provision of information necessary to take informed choice”. In my view, now is the time to make it clear to staff, in whatever way the company chooses to deliver the message, that if they are suffering from severe debt issues, they should look at all their options to increase their take home.
Employers can continue paying contributions even if members take a contribution holiday and they can of course pay member contributions for them. I hope that employers consider these options.