Monday 13 February 2012

Workers risk exclusion from pension schemes


Last year the Government abolished the default retirement age and many employees were concerned by the prospect of a future in which they would lose their job earlier than anticipated, leaving them in financial hardship. New figures from the Office for National Statistics (ONS) now indicate that pension schemes are getting more expensive to finance as we live longer.

In 2011 mortality rates were much lower than expected, and the ONS attributes the fall to medical advancements. The Head of Mortality Research at Punter Southall, Ross Matthews, said that as life-expectancy increases so, inevitably, does the cost of pension schemes.
"If the 2011 fall in mortality rates continued, a man of 65 retiring today could expect to live to 91, three years longer than the typical current estimate of 88. A 45-year-old would live to 95, seven years longer. This equates to an increase of up to 15% on pension scheme liabilities, potentially driving deficits by up to 50%."
Not only are pension schemes getting more expensive to finance but some low-earning employees also risk falling outside the ambit of such schemes. The trade Union Congress (TUC) has warned that a pension scheme to be launched later this year, which would automatically enrol employees, could leave out thousands of low-earning female workers.

At the moment, workers would be automatically enrolled if they earned just under £7,500 a year. However, there are indications that the limit will be increased to £10,000, which the TUC said would adversely affect 1.8 million female workers.

Brendan Barber, the General Secretary of the TUC, said that the Government should freeze the earnings threshold. He feared that the exclusion of thousands of workers would have unintended consequences beyond what could be forecasted.
"Whether this is the best way to help the low-paid is an interesting debate, but it would be disastrous if it had the unintended consequence of excluding a significant proportion of women workers from pensions saving."
If the earnings level is increased it would also affect 500,000 men according to the TUC. However, as women are more commonly found in low-wage jobs they would be worse off as a whole compared to low-earning male workers.

In the current financial climate many are struggling with making ends meet, some to the extent that it becomes necessary to take on an extra job. By removing employees from retirement schemes more insecurity will burden many workers and add to a stressful everyday life.

More on this story:

Are you looking for expert legal advice on employment?

More information on retirement:


No comments:

Post a Comment