Why Auto Enrolment is a Good Thing for the UK

Why Auto Enrolment is a Good Thing for the UK
James Richings
9/30/2015
Updated:
11/27/2015

Many businesses have been panicking about the introduction of auto-enrolment. There is always going to be a cost involved with pensions in terms of administration and processes, as well as any contributions that need to be made on the part of the employer. However, there is little doubt that examples in New Zealand and other countries have shown that auto-enrolment is a good thing for a country.

The UK is in a situation it hasn’t been in before. Much like the rest of the world we have an ageing population and increasing pressure on those that work to provide for those that no longer do. Retirement ages are increasing and it’s time now for people to start realising that they need to save longer and harder than ever before if they want a decent life in retirement.

The reality is that saving from your thirties is exponentially better than waiting until your 50s. If you save 10% of your income into pensions and retirement investments from your 30s, or earlier, you are likely to have a decent fund for retirement. “When planning for retirement it’s important to work backwards” a financial adviser at financial planning company Totarafp told us. “You need to work out how much money you are going to need in retirement and then work out what you need to save monthly in order to achieve that lifestyle. The problem is that when you do so you realise that you are going to need a lot of money. When we retire we have more time and therefore it is much easier to spend more. True, we may have paid off a mortgage, but the reality is that life will get more expensive over the years too.”

Auto-enrolment has brought pensions to everybody. Even those that hadn’t thought about the option of investing in a pension are now able to do so without even making the decision. They will be able to benefit from employer contributions without having to go through excessive paperwork, or understanding much about what is happening.

In the future auto enrolment will mean that more people have more money for retirement. It will mean that more people have a lifestyle that satisfies them in retirement. Retirement is becoming a longer part of our lives as life expectancies increase. Start saving early, and if you can contribute more than the minimum, you will be happy you did.

It is also noteworthy that pension contributions may not always be tax free. At the moment pension contributions do not attract tax and therefore are highly tax-efficient, especially for higher rate taxpayers. In the future this may not be the case. It is always a good idea to find out more about the pension landscape by speaking to a financial advisor, and work out what is best for you in terms of your tax, investments and retirement planning situation.

James Richings is a 26 year old writer and blogger from the United Kingdom. He loves to write about his passions and hopes his interests, interest you also!
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