In Australia, if an employee earns over a certain amount, their employer must pay 9.5 per cent into their pension (or superannuation fund as it is known in Australia). Furthermore, they employ auto-escalation, so that pension contributions increase every year. In the UK, meanwhile, the total minimum contribution that has to be paid is currently only two per cent. However, this is increasing to eight per cent, but not until 2018. What’s more, the employee has to pay the majority of that. With this responsibility to save more on employees, shouldn’t employers be making them aware that what they are saving now probably isn’t enough to get the retirement they want? Are you communicating this information to your employees?
While there has been a lot of buzz around pension freedoms, giving employees more options with their hard-earned savings, Australian employees always had the option to take out all of their savings. Now the Australian government has introduced tax incentives to dissuade employees from doing this as some have done exactly what we feared would happen here – they have blown it all and rely on the state to support them for the rest of their retirement. In fact, there have been discussions in Australia to make buying an annuity compulsory. Only time will tell which method will work best, but what is clear is that your employees need as much help as they can get to understand their options and why it is so important to save.
If you want to find out more, speak to your usual Jelf consultant or visit our website.