Delay to pension enrolment scheme slammed

The government has been accused of putting the retirement incomes of low paid workers at risk after giving small firms more time to move employees into pension schemes.

Companies with 50 employees or fewer will no longer have to begin automatically enrolling workers into their own pensions or into a government scheme from 2014, following a timetable change announced on Monday.

Under rules being phased in from October 2012, workers aged between 22 and 65 and earning more than £7,475 will be automatically enrolled into their employer’s existing pension scheme or, if there isn’t one, into the National Employment Savings Trust.

But the smallest firms will now have until May 2015 to comply, rather than April 2014 as originally planned.

The delay could cost workers in small firms more than £200 a year and affect the retirement prospects of “some of the poorest in society” according to Fidelity Worldwide Investment.

It claimed that employees aged 50 now and on average earnings may now get a retirement income almost 10 per cent lower because of the one-year of delay. In contrast the delay will save companies just £100 a year per employee on average earnings, with the planned rise in employer pension contributions also being phased in later.

Julian Webb, head of Fidelity’s defined contribution and workplace savings business, said: “Delaying saving for retirement is rarely a sensible decision and will result in lower incomes for some of the poorest people in society.

“The eventual result is that people end up needing more support from the state in retirement which will further undermine the perceived benefits of these savings. In effect the government is foregoing future benefit savings to reduce employer and employee costs in the near term. This looks like borrowing by the back door.”

Tom McPhail, head of pensions research at Hargreaves Lansdown, said the government had betrayed small business employees in the private sector.

“The present pensions crisis will only get worse if governments aren’t prepared to take tough decisions in order to safeguard our long-term retirement provision on a sustainable basis,” he said.