From 6 April this year, the minimum contribution for staff automatically enrolled into a workplace pension scheme will rise from two per cent to five per cent, and this percentage will be made up of three per cent from the employee and two per cent from the employer.
However, according to recent research, more than a quarter of senior business decision-makers are unaware of the increase and over 40 per cent do not know that there will be a further rise to eight per cent next year.
Interestingly, the research found that small businesses are more prepared for the rise, with four out of five saying they knew of the upcoming changes, while only 66 per cent of large firms could say the same. Among those who did know about the increase, 92 per cent also knew that their business could be fined if they did not implement it.
Workers themselves are less informed however, and there are fears that the increase could prompt a spike in the number of people opting out of their pension scheme. As one commentator said, many young people say they do not have the spare cash to save and could opt out as a result.
This would be a pity, as according to official data from the Office for National Statistics (ONS), overall membership of workplace pensions has grown from 67 per cent to 73 per cent. However, almost half of those who contribute to a private sector pension paid in less than two per cent of their salary.
For this reason, the Government has been urged to review the balance between what the employer and employee contribute, with a spokeswoman for the Trades Union Congress (TUC) arguing that employers are putting in “the bare minimum”.