Impact of the increase in the state pension age
July saw changes to the age in which people are eligible to receive the state pension. Although the issue has been largely politicised, these changes will undoubtedly have far reaching consequences for a large section of the population, particularly those under the age of 39.
Few people would argue the merits of a move like this, after all, it's critical that governments attempt to rationalise the looming burden of state supported longevity. With the population growing and people living longer, national savings are irreconcilably out of sync with the pension responsibilities ahead.
Yet the changes will affect young people more than anyone else. Professionals under the ages of 39 could well be hit hardest. Not only have they not yet reached senior level management and thus had the opportunity to reach higher earning levels, they will also never see the long term auto enrolment benefits that the next generation will.
Between 1940 and 2010 there wasn’t a single change in the retirement age. Women could retire and receive state support when they reached 60, while men could retire at 65. Since then there have been a host of amendments introduced. But what do these changes mean for auto enrolment?
At AEclipse we know that these measures are just another reminder of the importance of saving. The maths on looking after people in their old age just doesn’t add up. These constant increases in the eligible age to receive a state pension are likely to continue and as governments make their projections, we should not be surprised when we are told we'll have to stay in full time work even longer.
David Gauke, the work and pensions secretary, said that failing to act "would be irresponsible and place an extremely unfair burden on younger generations”. He's right. But it’s blatant evidence that auto enrolment will creep deeper into daily business life over the next few years.
Employers and their agents who have so far buried their heads in the sand are making a big mistake. We are at the start of a new dawn of forced savings. With this in mind, it makes sense to do it properly. It makes sense to get help from experts, to choose the right pension scheme, to change if your existing one isn’t good enough, to look after your staff by showing the due diligence they deserve.
Auto enrolment is not going away. It's here to stay. If you don’t have the time or the inclination to handle it you should talk to AEclipse. We’re perfectly positioned to manage all these responsibilities on your behalf for a very competitive, low monthly fee. Give us a call. We’re always happy to have a no obligation chat.