shababfinacecolumnWhat’s auto enrolment
Roughly about a year ago the government started auto enrolment. This is an initiative to get the British public to save more for retirement. Initially auto enrolment started with the largest employers in the UK and by 2018 all employees who earn over £5, 668 will be opted into a pension scheme. If you choose to remain opted in you will have to pay 5% gross salary as well as your employer paying 3% of your salary into the scheme.
Your hard earned monies shall be invested into funds within the Nest scheme. In theory this money should grow and supplement state retirement income.
So is it worth being in the Nest scheme? Well at the moment only 10% of people whose employers have had their staging date have said no thank you I am not interest, and the remainder feel it’s a good idea.
So whose probably chosen to opt out? Well at a guess it’s probably individuals whose whole pay packet gets spent on accommodation, food and bills, as well as those near retirement who do not see the point in joining a scheme in their later years and probably graduates with a large debt who do not want more money going out of their wage packets.
Let’s face it we all need to prepare for retirement because our country is no longer financially strong, and with a growing population of elderly individuals, can the country really afford to give us a good state pension? I would say most people under 40 would agree with me that 25 plus years is a long time of uncertainty to retirement. How many of us can really put their hand on their heart and say yes I will get a good state pension and that we can rely on kids to support us or even that our kids will be able to afford or willing to support us. I know I am not relying on the state pension, and neither would I want to have to be a burden to my kids in the future; therefore i guess the only solution is save more now, or work much longer!
As someone who advises clients, I think Nest is a good idea, but in this day and age, when everything is getting more and more expensive, NEST will be the last thing people want to contribute into. The scheme is for everyone, but sadly those that should be saving the most i.e. people on incomes below £15, 000 will probably not remain in the scheme for long because, put simply, I am not sure how they can afford to do so.
For more information on auto enrolment please visit www.pensionadvisoryservice.org.uk
Please note the above is an expression of my opinion, and not advice.