The Association of British Insurers is urging the government to consider further incentives to boost pension saving in the workplace. The ABI’s call for action comes as new, independent research by IFF Research and Continental Research, reveals: - 16 million people are not confident that their income in retirement will be sufficient. - 9 million are less confident about their pension than they were a year ago. - 15 million say they know little or nothing about pensions, including almost a half of the under 35s.
With many saying they aren’t saving for retirement because they have little spare cash, the ABI’s proposals are designed to help employers help their employees save for retirement. According to the ABI, employers are key to generating change in people’s retirement saving habits. Take-up of employer pension schemes is just 13% where there is no employer contribution but increases significantly to 69% when employers make a 5% contribution.
The ABI is proposing two new employer-based incentives:
By paying employers who facilitate the delivery of financial advice in the workplace, the Advice Credit could reduce the savings gap by as much as £2bn at a cost of only £100m to the Government. Employers would receive a refund of their employer National Insurance Contributions to fund regular advice sessions. The Credit can be targeted on small employers and because it is envisaged that there will be sessions every five years, it will have a lasting impact.
The ABI’s Pension Contribution Tax Credit (PCTC) has been designed to encourage employers to contribute to employees’ pensions and would reduce the savings gap by around £3bn at a cost of only £900m. The PCTC is flexible, with small employers receiving a larger Credit than large employers. The PCTC will also support occupational pensions schemes by making them more affordable for employers.
Should employers do more to promote savings? And should they get involved in the provision of financial advice to employees? Post your comments below.