According to the CIA World Fact Book, the life expectancy in Guernsey is now 82.24 years. This ageing population means that the younger generation is having to pay far more for the older generation than ever before and this will only get worse.
In an attempt to counter the rising costs of an older population, the UK has introduced Automatic Enrolment.
Put simply, all employers will automatically enrol their employees (who meet certain criteria) into a workplace pension; both the employer and the employee must pay contributions to the scheme and employees must physically opt-out if they do not wish to be a member of the scheme. The advantage of this is that most people should have saved something towards their retirement and the burden on the tax payer lessens somewhat. How effective it will be, remains to be seen.
According to the Key Facts brochure by the Department for Work and Pensions, in the UK in 1901 there were ten people of working age for each person of retirement age, in 2010 it was only three to one and by 2050 it is expected to be just two to one.
In Guernsey the 2010 ratio was approximately four to one. However, the projected ratio for 2050 (according to the Guernsey Annual Population Bulletin) is less than two to one.
The current situation here in Guernsey is not as bad as in the UK. However, it will get worse over the coming years and therefore the States of Guernsey will have to do something.
So, back to the original question, will Automatic Enrolment into a workplace pension happen in Guernsey? Yes, we believe that it is highly likely, although probably not in the very near future as it will take some time to plan and rollout. It seems logical that they would elect to follow a similar path to that of the UK.
There is of course no need to wait for the States of Guernsey to introduce new legislation, you could begin to help yourself or your employees save for their retirement now.
One of the best options in Guernsey is a Retirement Annuity Trust Scheme (RATS). A RATS can be set up by an individual or a corporate body for all of their employees. Employers can arrange for their staff to have their own individual RATS and decide the rate of any charges and contributions they wish to pay. There are many options available and the use of a RATS can be tailored to individual or corporate needs.
Key advantages of a RATS are:
– Flexible contribution options
– Tax relief on contributions (subject to certain limits)
– Amalgamate existing pensions, including those from the UK (QROPS Approval is required)
– An Employer can choose to add other benefits, ie Death in Service or Private Health Insurance
– Tax free lump sums available from age 50 (up to 30%, subject to certain limits)
– Attractive benefit when recruiting and for the retention of staff
– No Social Security contributions are payable on contributions paid by the Employer
– Members can draw down directly from the RATS; this means that residual funds at death are paid to nominated beneficiaries and not left with an insurance company
This blog has kindly been provided by Criteria Wealth Management Limited who can provide a free review of your current and future pension arrangements and would be happy to meet at a time and place that suits you. Please see further information on their website www.criteriawm.com or email [email protected]