NHF Warns Pension Changes Will Triple Costs For Employers
Pensions auto-enrolment was introduced in April 2012 and has led to 9 million workers saving into a pension for the first time. As life expectancy increases, it’s more important than ever to save for retirement – or face the bleak prospect living in poverty in old age. Since auto-enrolment was introduced, the contributions for both employers and employees have been set at 1%. However, from April 2018, pension contributions will increase to 2% for employers and 3% for employees, and they will increase again to 3% for employers and 5% for employees in April 2019.
Increase Costs For Employers
The government has also unveiled plans to reduce the minimum age for enrolling staff from 22 to 18 in ‘the mid 2020s’ provided their earnings are over £10,000. This will bring around 900,000 people into the pension system, and will further increase costs for employers who will need to make contributions for this age group for the first time.
Calculate Contributions On All Earnings
There are also moves to calculate contributions on all earnings up to £45,000, rather than the current ‘banded earnings’ system which calculates contributions on earnings between £5,876 and £45,000.
An Impact On Hair & Beauty Sector
NHF chief executive, Hilary Hall, said, “As well as the scheduled increases which will triple pension costs for employers over the next couple of years, future plans to include younger workers and to move away from contributions based on ‘banded earnings’ will further increase employer costs. These two measures will have a disproportionate impact on the hair and beauty sector because of the sheer number of young people working in our industry, while the banded earnings change will have a bigger impact for workers on minimum wages, also common in our industry. We may therefore see more workers choosing to opt-out of pension contributions, which would defeat the aim of getting people into the habit of saving for retirement.”
Please visit NHF site here for more information on the industry.