A survey report published today by the Association of Consulting Actuaries (ACA) finds around 50% of employers expect retirement ages to move out to between age 68 and 75 by 2028.
At present, around eight out of ten employers say their employees typically retire at age 65 or younger; by 2020 two-thirds expect the typical retirement age to be 66 or later.
The survey report notes that over the next 18 months, around a further 35,000 employers with 50 or more employees will be required to auto-enrol eligible jobholders, with many other employers covered by later staging dates working through exactly how they will comply. This is a ten-fold increase in employers subject to auto-enrolment duties compared to the first year. However, from June 2015, a further 1 million small (5 to 49 employees) and micro employers (4 or fewer employees) must auto-enrol eligible employees in just over a two-year period. This represents about a 170-fold increase in the number of employers subject to auto-enrolment duties compared to the last 12 months.
The majority of employers (61%) expect their payroll costs to rise by up to 2% as a result of auto-enrolment, but close to half of smaller employers (46%) expect payroll costs to rise by more than this.
Key survey findings in today’s report
➢ Employers responding to the survey report average rates of contributions into defined contribution pension schemes have changed very little over the last decade – contribution rates are generally failing to keep pace with the pension costs of longer life-spans and an economic climate with low investment returns.
➢ Employer contributions into defined contribution pension schemes across our sample are averaging between 41⁄2% and 7% of earnings as a whole, with relatively small variances below (generally smaller employers) and above this figure (generally larger employers). Employee contributions hover between 4% and 41⁄2% of earnings, again with employees of larger firms typically contributing above this figure and those of small employers below.
➢ Close to six out of ten employers (57%) support the idea of ‘automatic escalation schemes’ where pension scheme members are encouraged to increase their pension contributions at a future date often in line with increases in earnings.
➢ The processes involved in preparing for auto-enrolment is ranked as the most problematic area of auto- enrolment, followed by regulatory complexity (ranked top problem by smaller employers), with communications ranked fourth (but second by large firms).
➢ Eight out of ten smaller employers have not yet budgeted for the likely increase in costs arising from auto-enrolment.