Are You Ready For The Pensions Crisis?

The population is ageing as people live longer which means we don’t have enough people working to fund pensions at the level needed to meet future demand. There is, therefore, a growing need for people to finance their own pensions and for employers in all sectors to play their part.


Pensions are often considered too dull a topic to be of interest as most people hope someone else will deal with it for them and so delay taking action until it is too late.

There is, however, a looming crisis as people and businesses avoid taking control and rely on the welcome but inadequate state pension introduced over 100 years ago.

More recently, government introduced pension auto-enrolment in 2012 in an attempt to raise awareness and increase the number of people and businesses contributing to pension schemes.

Business Issues

Large businesses are coming to terms with the need for less generous pension schemes but small businesses need to develop a better understanding of the issue to deal with the implications.

Small businesses must make arrangements to ensure their payroll systems deduct the correct contributions for individuals and must also allow for the extra costs associated with the administrative process.

Even though auto-enrolment has increased the number of people with pensions the overall figures are still relatively small and the contributions too little to make a significant difference.

Auto-enrolment is compulsory for all businesses and is helping to capture more people in the pensions net but it is only the first step, as contributions by companies and individuals must be increased to solve the problem.

Any responsible government will keep the issue at the top of their agenda even though it may prove unpopular and difficult to implement in the short-term.

The Challenge

The challenge, of course, is that people need to contribute more at a time when money is scarce and saving for the future is difficult if not impossible.

In future years, government will want to share the pain of pension liabilities and, therefore, will expect employers to make greater contributions, which, in turn, will increase the cost of doing business.

The recent announcement by the Chancellor to allow people to withdraw cash from their pensions will complicate matters further but is evidence of how seriously the government is treating the issue.

Businesses are already facing a bigger workload and having to take more responsibility for staff pensions, as employees need more information and more regular updates than in the past.

Regardless of who is in government we are going to hear a lot more about pensions and the need for us all to contribute much more for far longer.

SO, pensions will move from the fringes of concern to centre stage, as a traditionally bland and boring topic becomes a serious source of stress for politicians and the people who vote.