Government delays crucial pension reform

by Ed Bowsher on 29 November 2011  |  1 comment
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Many people will end up with smaller pensions thanks to a dumb delay by the government.

Have you heard of auto-enrolment? I know it sounds dull but it’s actually really important.

Basically, it’s a government scheme which should push more people to save for their retirement.

Once it’s fully implemented, all employees over the age of 22 will have to make regular contributions into a pension fund. That’s unless the employee decides to opt out of the scheme.

You can find out more in Get ready for the biggest pension shake-up in history. 

I’m a big fan of auto enrolment because I think it’s essential that more people save for their old age. So I’m disappointed that the government has decided to delay the implementation of this scheme.

The original plan was that larger employers would start auto-enrolment next year while businesses with fewer than 50 employees would introduce the scheme between 2014 and 2016. But the government has now decided to delay things.

The implementation process for smaller employers will now start a year later than planned in 2015. That means some smaller employers won’t have to introduce the scheme until 2017 - five years later than the largest employers.

Steve Webb, the pensions minister, says the delay is aimed at giving smaller employers “additional breathing space” during “tough economic times.”

I can understand why he thinks that. If we want the economy to start growing at a decent rate, we need more small business start-ups. But we also need to get more people saving for retirement. If we don’t do that, the state will face bigger bills in 30 years’ time.

There’s also a danger that some businesses will purposely cap the number of people they employ below 50 so that they can benefit from this delay. So this move could potentially slow down the growth of some smal businesses.

Yes, the economic situation is very serious, but so is the pensions crisis. This delay is a mistake and I hope the government changes its mind.

More:  Become a pensions expert in five days  |  Check out lovemoney.com's annuity calculator