danielashby

Homeowning: The naivety of youth

Buying a house.

It's one of the biggest commitments your child will have to make when they grow up, but research from Halifax shows that many children and teens aged 11 to 21 are in the dark about how buying a house actually works.

What do they think?

Among all 11-21-year olds, there is a widespread belief that the average price of a first home in London is between £50,000 and £200,000. In fact, the average price of a first home in London is more than twice that, at £422,580.

There is a difference in beliefs among the age groups within the 11-21-year old bracket.

11-14-year olds

The youngest teens believe that:

• Mortgages are unlimited (20%)
• Their parents will pay for their house (33%)

The top three places to look for a property, according to this age group are:

• The internet (36%)
• A 'house shop' (33%)
• The bank (27%)

The priorities of 11-14-year olds upon moving into their new house are also interesting, with young teens most anxious to:

• Meet the neighbours 32%
• Get Wi-Fi 24%
• Buy a sofa 12%
• Throw a housewarming party 5%

15-17-year olds

For those in their mid-teens, expectations seem quite pessimistic; 23% of 15-17-year olds believe only rich people own their own homes, whilst 25% think that it will take 20 years of saving to gather enough for a deposit.

18-21-year olds

Among older teens and young adults, opinions seem to be more realistic, with home ownership of high importance to 59%. However, some aspects remain tinged with naivety, as:

• 27% expect to own property by the age of 25 (the average age of first time buyers is 31, rising to 32 in London)
• 10% define Stamp Duty as money used to buy stamps
• 23% of males and 5% of females think that they will need a deposit of £5,000 - £10,000 (the current average is £32,321)
• 31% of males and 18% of females are counting on inheritance to pay off their mortgage

How can you educate your children and teens?

Opening the bank of mum and dad (and grandparents) is increasingly necessary these days. But giving money away is not enough. It is also our responsibility to prepare them for the house-buying process so that they can tackle as much of it as possible on their own two feet.

These five tips should offer a good foundation for that education:

1. Work it out together

Start by communicating and finding out what your child wants in life. The type of lifestyle they aspire to have will largely dictate how they work toward it. Explain that things are unlikely to fall into place as soon as they enter the adult world and that they may have to compromise on some aspects along the way.

2. Look at the options

Using the time they have before buying a house is necessary, to look at some of the available options, there are several sources of help, for example; calculators and government schemes.

Use online calculators to determine how much mortgages cost and how much your child is likely to need to save to buy a house. Then investigate how much buying a home costs when you factor in the legal and moving costs.

Secondly, read up on Lifetime ISAs, Help to Buy schemes and Shared Ownership. These are all designed to get young adults onto the property ladder and could turn out to be the helping hand your child needs.

3. Create a plan

Now that you know where your child wants to be in the future and how much will be required to achieve that, you can work with them to create a plan. Consider how old they are and how much they will be able to afford as their income increases over time and work out a rough guide to get them homeowner ready in their 20s.

4. Check their credit and find ways to improve it

Of course, this is aimed at older teens and young adults, but it is never too early to learn about the impact of a credit score and what they can do to keep it healthy as they transition into adult life.

If your child is not old enough to have credit, you could show them your own credit profile and explain the different aspects and how they impact on the ability to access credit.

5. See a financial planner together

It may be worth taking you child along to an appointment with a financial planner so that they can see how important finances are in adult life. However, if your child is already over 18, maybe they would like to start seeing a financial planner themselves?

Either way, why not give us a call to see how we can help?

by danielashby

Hope for savers as Cash ISA interest rates begin to rise

The past decade has been miserable for savers.

Low interest rates, coupled with prolonged periods of relatively high inflation has meant that capital held in savings accounts is guaranteed to lose value.

However, research now shows that there might be a light at the end of the tunnel, especially if you have a Cash ISA (Individual Savings Account).

Boost for Cash ISAs

According to MoneyFacts, both the average interest rate and number of ISA products available has increased consistently during the first two months of 2018.

Both Instant Access and 18+ month fixed-rate ISAs saw an increase in rates between December 2017 and February 2018, resulting in:

• Instant Access rates jumping to 0.78% from 0.68%
• Fixed rate ISAs rising from 1.38% to 1.46%

They might seem like small increases, but they can make a big difference to your savings, especially if you are using your ISA Allowance in full each year.

Looking at the bigger picture, the upward trend in both interest rates and ISA popularity are both positive signs for those who have already put their money into an ISA account.

Should you open a Cash ISA?

Whether you have never had one, or are thinking about reviving an old account, the rate rises should be seen as a catalyst for reviewing your interest rates.

Before deciding whether a Cash ISA is the right vehicle for your savings, it is important to know how it works and what you can do with it. In brief:

• A Cash ISA holds your deposits and interest is added on a tax-free basis
• Cash ISAs are available through banks and building societies
• You must be 16 to open an Adult ISA, but parents and grandparents can open a Junior ISA before this age, and you can hold both a Junior ISA and Cash ISA from 16 to 18
• Each year, you can deposit up to £20,000 into ISAs. If you have a Lifetime or Help to Buy ISA, your allowance will be spread across the two accounts
• Instant Access Cash ISAs allow you to withdraw your savings whenever you want, while some Cash ISAs will require that capital is stored for a set amount of time

Making the most of your Cash ISA

If you're already paying into a Cash ISA and want to make sure that you are getting the best returns on your deposits, there are three things you can do:

1. Check your rate and shop around

Compare your own rate to those available elsewhere. You can do this either online or in person but be sure to check a range of comparison websites to get a balanced perspective.

Consider the unknown. There are a variety of banks that you have probably never heard of; both challenger banks and Islamic banks are on the rise and may be able to offer you something better than you will find on the high street.

Islamic banks operate without paying or charging interest but offer profit instead. These banks operate in a different way to the firms you are used to but could still be a viable option for your savings.

Before settling on a bank or building society, make sure that they are protected by the financial Services Compensation Scheme (FSCS), this guarantees that your savings (up to £85,000) are not lost, should the provider go under.

2. Move your ISA

You can only open one Cash ISA in a tax year. But if you have noticed that the rates on another bank or building society's products are better than your current ISA account, don't be afraid to transfer your existing savings over.

If you choose to do this, you will need to make sure that your new bank or building society accepts transfers and complete an ISA transfer. Remember that you do not need to close your first account or withdraw your savings, as the two providers will carry out the transfer on your behalf.

3. Make use of your allowances

The Annual ISA Allowance is currently £20,000 per year. That means that you can make deposits up to that amount, spread across your ISA accounts, each year.

The Personal Savings Allowance allows you to earn up to £1,000 each year through savings income or interest, without incurring tax. However, this allowance is not affected by ISA accounts, so you are free to use another type of savings account to hold any deposits outside of your ISA allowance in a tax-efficient manner.

Do you need financial advice?

If you find yourself feeling lost and confused when it comes to savings and investments, now is the time to seek independent financial advice.

A financial adviser will be able to give you tailored solutions to help you work toward the future you dream of, whatever that involves.

Ready to start planning your financial future? Get in touch.

by danielashby

The gender pay gap: even pensions are not immune

By the age of 50, men's pension pots are double the size of women's, according to research from Aegon.

Why?

• The gender pay gap
• Differences in working hours
• Family responsibilities

What is the gender pay gap?

According to the Government Equalities Office: The gender pay gap is an equality measure that shows the difference in average earnings between women and men. (Source: gov.uk)

The past three months have seen huge progress made in terms of equal pay and the gender gap. In December, the Equality and Human Rights Commission declared that all companies must disclose the difference in pay between male and female employees, alongside limitless fines for non-compliance.

January has seen large media focus on the 500 large UK companies shown to have a significant difference between male and female staff wages.

The Government Equalities Office reports that the gender pay gap is now at its lowest level since records began; 18%.

What causes the difference in lifetime income?

The opinions on this topic are hotly debated and vary widely from group to group. However, there are three factors which may affect the average lifetime earnings of women:

1. Industry and sector:

There are less female employees in high-paying industries.

Research has shown that certain industries pay proportionately higher than others. A great example of this is STEM industries (science, technology, engineering and mathematics). In 2016, a worldwide study showed that entry level positions in this sector pay, on average 20% more than other fields. (Source: Korn Ferry)

Further research has shown that, despite 13,000 women entering the STEM sector, the overall percentage of women working in these industries has fallen from 22% to 21%. (Source: WISE Campaign)

2. Time spent in work:

Throughout life, there are events which force women to stop working, or reduce their working hours, including pregnancy, childcare and caring for relatives or loved ones. This means that, over a lifetime, men are likely to have more working hours in total, than women.

In September 2017, women made up almost three quarters (73.55%) of the part-time workforce, whilst men accounted for 63% of all full-time employees. (Source: ONS)

In addition to this, men who work full-time are likely to work longer days. According to Statista, in the year to June 2017, men worked for an average of five hours more than women each week

3. Seniority:

Research from the Chartered Management Institute last year, showed that 66% of junior management positions are filled by women. Comparatively, senior management positions are more likely to be filled by men, with 74% of current positions held by males.

The same study found that, for women who are employed at a senior management level, pay is still disproportionate, with:

• Male directors paid an average of £175,673
• Female directors paid an average of £141,529

In addition, annual bonuses have shown a gender gap of 83%. Male CEOs receive an average annual bonus of £89,230, whilst females in similar positions receive just £14,945, on average.

How does that effect pensions?

People who earn more money can afford to put more aside for the future, it's that simple.

Given that employees are only automatically enrolled into a workplace pension, if their annual earnings reach £10,000 or above, it is likely that many part-time employees are not eligible. That means that many women, who have reduced their working hours may be left unable to save for retirement.

In 2015, government research showed that just two fifths of those who were eligible for automatic enrolment were female. (Source: Gov.uk)

The problem is further compounded by the fact that employer contributions are based on a percentage of earnings and the larger the contribution, the greater the level of tax relief.

What can you do?

There are many things you can do to improve your retirement income.

The only thing you shouldn't do, is nothing.

Of course, you can rely on the State Pension as a base income, if you have accrued enough credits to receive it. But it is unlikely that it will be enough to pay your living costs, any care needs you have and allow you to enjoy having more time to yourself.

To boost your pension savings, you can:

Ask to be included in your employer's workplace pension. Even if you fall below the earnings threshold, you can ask to be included in the scheme. The minimum contribution rates are due to rise in April, so be aware of how much you will lose in monthly income by doing so.

Start saving. Choose a vehicle which works for you, whether a savings account or pension, and start putting money away.

Seek independent advice. Research has shown that people who seek professional advice could save up to £98 each month toward their pension, giving themselves an additional £3,654 in retirement income each year.

Looking to make sure that you get an equal pension fund in later life? Contact us for more help and advice.

Please note:

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.

by danielashby

Low growth predicted for UK house prices during 2018

Experts from Nationwide have predicted that house prices will largely remain flat throughout 2018, rising by a marginal 1-1.5% during the next 12 months.

Trends of 2017

Last year, London saw house prices slow significantly, with the growth rate falling for the first time in nine years.

In other regions, averages varied from month to month. For example, in northern England, Scotland and Wales, house prices are now 5% lower than they were 10 years ago.

Robert Gardner, Chief Economist for the Nationwide Building Society, said: Annual house price growth remained in the 2-4% range throughout 2017, in line with our expectations and broadly consistent with the 3-4% annual rate of increase we expect to prevail over the long term, as this is also our estimate for earnings growth over the long run.

Predictions for 2018

For those hoping house prices will rise in 2018, the outlook for growth is not optimistic. The ever-present squeeze on household budgets is predicted to slow down housing market activity, which will, in turn, affect house price growth.

Robert Gardner, again commented: We continue to expect the UK economy to grow at modest pace, with annual growth of 1% to 1.5% in 2018 and 2019. Subdued economic activity and the ongoing squeeze on household budgets is likely to exert a modest drag on housing market activity and house price growth.

Overall, we expect house prices to be broadly flat in 2018, with perhaps a marginal gain of around 1%. Over the longer term, once the economy regains momentum, we would expect house prices to rise broadly in line with earnings (around 3%-4% per annum), though if the rate of house building fails to keep up with population growth, prices may outpace earnings once again, as they have in recent years.

Factors expected to affect house prices in 2018

There are four key areas which could challenge the growth of house prices over the next 12 months:

Politics: We don't like to bring politics into things, if it can be avoided, but there's little we can do this year to avoid the effects of Brexit. With the deadline for negotiations approaching in early 2019, it is not yet certain how the housing market will be affected by the EU/Britain divorce settlement.

New policies: The 2017 Autumn Budget brought in some big changes for prospective homeowners. With cuts in Stamp Duty for first time buyers purchasing homes under £300,000 and a reduction in the tax for homes costing up to £500,000, new buyers may be able to afford more expensive homes than they planned.

However, there has been speculation surrounding whether those selling properties will view this as an opportunity to simply push the asking price up.

Rate of building: Throughout the first month in 2018, house prices saw a surprise boost due to a lack of available housing. Robert Gardner commented: The flow of properties coming on to estate agents' books has been more of a trickle than a torrent for some time now and the lack of supply is likely to be the key factor providing support to house prices. Though Nationwide do not believe that this will change their prediction of a marginal growth of 1-1.5%. (Source: The Guardian)

Interest rates: In November 2017, the Bank of England (BoE) doubled the base interest rate from 0.25% to 0.5%. This had mixed results, with savers seeing potential growth in their deposits and borrowers facing higher repayments.

The interest rate rise means that most mortgages will now be subject to higher interest rates, so homebuyers taking out a mortgage in 2018 might see higher monthly repayments than those who bought their house before the interest rate rise. That could result in lower buying rates and overall affordability.

What do other experts say?

Halifax predict that house prices will grow during 2018; but only slightly, with some external influences having major effects on the market. Russel Galley, Managing Director of the bank, says: On the flip side UK House Prices in general are likely to be supported, seeing modest growth in 2018, through the combination of a shortage of properties for sale, continued low levels of housebuilding, low unemployment levels and finally good levels of affordability due to the low interest rate environment. Despite the recent rate rise we do not expect this to have an adverse impact on transactions. A further rate rise is not seen as imminent and we may not see one until the latter part of 2018, if at all.

Fionnuala Earley, Hamptons International Residential Research Director has given her take on the 2018 housing market. She predicts house prices will rise by 1%, with rents increasing by double that. She concludes, The 2018 outlook for house prices is fairly benign given the economic conditions. (Source: Zoopla)

We won't try to guess what is going to happen to the housing market during 2018, but we can help you to plan for whatever the next 12 months has in store. So, if you're planning to buy a house soon, get in touch.

by danielashby

Why lattes cost far more than you think

A new outfit, a cup of coffee, pizza on a Friday night. They're small, impulsive purchases, but they soon add up.

Research from Scottish Widows shows that each month, we each spend an average of £124 on things we could do without.

By swapping these 'little luxuries' for the simpler things in life, you could treat yourself to an extra £9,853 annual retirement income in your later years.

So, what are these 'luxuries', and how much do they cost us each week?

• Hobby equipment that never gets used: £2.18
• Using public transport for journeys within walking distance: £3.78
• Unnecessary taxi rides: £4.25
• Hot drinks from coffee shops: £6.95
• Disposable fashion: £7.88
• Ready meals: £10.87
• Shop-bought lunches: £11.78
• Snacks and sweets: £14.81
• Unnecessary takeaways: £16.82
• Nights out: £19.21
• Going out for dinner: £25.74

Each year, that adds up to £1,491.28.

(Source: Scottish Widows report)

Of course, we're not suggesting that you forgo everything that makes you happy, but even cutting down on a few 'luxuries' could give you extra money to boost your retirement savings.

Most intend to save more

32% of people say that they are already saving as much as possible, but with 12% admitting that they never keep track of their incidental spending habits, it is estimated that many of us underestimate how much we spend on 'little luxuries' by approximately £74 each month.

62% of people plan to set themselves a financial goal for 2018, of those:

• 28% want to spend less
• 45% want to save more

Overall, 33% of us cut back on spending in January, with each person holding back £109.03 over the month. Just one quarter put this money into savings, whilst a third (30%) use it to pay debts.

If you are one of those who have promised to curb your spending habits over the next 12 months, why not consider some of the other ways you can use that £124, each week?

Better uses of your money

Auto-enrolment into workplace pensions has meant that over nine million people are now paying into a pension fund, with additional contributions made by their employer. (Source: DWP )

Currently, the minimum contributions made by both employees and their employers is 1% each. However, these will rise to:

• 2% employer and 3% employee contributions in April 2018
• 3% employer and 5% employee contributions in April 2019

Last September, Royal London reported fears that up to 30% of people could choose to opt out of their workplace pension once the minimum contributions rise. Updated research shows that it has fallen to 17%, which is positive. However, that still equates to around 160,000 people who will not have a pension fund.

With an ever-increasing State Pension Age that always seems to be just out of reach, workplace pension schemes are increasingly important. In addition to that, your employer is legally obliged to pay in their minimum contributions and you will also receive tax relief; so why pass up what is effectively free money toward your retirement?

Balancing luxuries and planning for the future

The biggest concern here, is that, rather than giving up the occasional takeaway or night out, people will choose to opt-out of their workplace pension to continue to enjoy those small luxuries. Of course, no-one can force you to use your money one way or the other. But, it might be worth considering just how important the coffee and ready meal you buy today, will feel in 30 or 40 years' time.

Taking advice is always recommended. Research from Unbiased has shown that, those who seek independent financial advice could benefit from additional savings of £39 each week, which could lead to an extra £3,654 in annual retirement income in later life.

To discuss how you can boost your pension funds and prepare for your future lifestyle, contact us.

Please note:

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.

by danielashby

New Year, New Office

On the 1^st February, we are opening an additional office in Stoney Stanton, Leicestershire and this month we have been busy getting it ready.

This new office will mean we will have client meeting rooms at three locations - Hilton Hall, Essington and Waterloo Place, Leamington Spa, being the existing two and now Shire House Business Centre, 4 Long St, Stoney Stanton.

The Business Centre at Stoney Stanton, will comprise of a variety of professional service firms including ourselves and a firm of solicitors.

We are particularly excited at developing this new location. If it's convenient for you, you are more than welcome to have your next meeting with us in the new Business Centre.

by danielashby

Re-assessing your finances in the New Year

The festive period can bring with it a great deal of financial stress; more so than at any other time of the year. So, when opening your bank or credit card statement in January, it may be the case that you are nearing or have exceeded your credit limit.

This often sparks an overall assessment of your financial position for the New Year ahead. It usually makes sense to clear existing expensive credit card and other unsecured loan debt. At the same time, you may also be considering raising additional finance for home improvements, a car purchase or (especially during these cold, grey days) a holiday.

Consolidation of existing debt, even with raising additional monies at the same time, can considerably reduce your monthly outgoings if the right solution is found.

Your first port of call is normally your existing bank or high street lender for a further advance, but your request will be declined if you do not meet the present underwriting requirements.

Your attention may then turn to re-mortgaging away from your current lender. This can of course be done, but in some instances a re-mortgage is not a viable option because of the following circumstances:

• The existing mortgage is a low Base Rate Tracker on an Interest Only basis, and to re-mortgage would ultimately be more expensive on a monthly basis.
• The existing mortgage is on a Fixed Rate and has punitive redemption penalties.
• Since taking out the existing mortgage there has been some impaired credit registered against you.
• You have a low credit score and will subsequently not pass a new lenders' affordability criteria.

Taking into account the above, a 'second charge' mortgage may be a option. Second charge mortgages have secondary priority behind your main (or first charge) mortgage. They are a secured loan, which means they use the borrower's home as security. This may be a viable option because:

• Second charges are not as expensive as you may think, with rates available from as low as 4% and with the vast majority having no early redemption penalties.
• A second charge can convert a re-mortgage decline into an accept because of differing underwriting criteria.
• Second charge loans are available for people with an impaired credit history.
• A second charge term can exceed the existing mortgage term and hence pass affordability criteria.
• Speed is normally of the essence when raising additional finance - second charge loans can be completed in weeks.

Whilst the circumstances that lead to a request for financial assistance may be quite daunting , in most cases there are options available to help resolve your monetary situation.

For more information on how our sister company Beaufort Capital Solutions can help you, please contact Clive Willson on 07966 074195 or email: cwillson@beaufortcapitalsolutions.co.uk

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage. There will be a fee for mortgage advice, the precise amount will depend upon your circumstances.

by danielashby

Seven changes you need to know about in 2018

As we head into 2018, with a new financial year a few months away, the government is preparing to introduce several changes. These will come into effect in April, and it is likely that you will be affected by at least one of them. Being prepared is the key to making the most of the changes and deadlines that are approaching.

To ensure that you are informed about the upcoming changes to allowances, savings and pensions, here are the seven biggest things you need to know about.

1. Higher Lifetime Allowance

As inflation hit 3% in the second half of 2017, Philip Hammond announced in the Autumn Budget that the Lifetime Allowance would rise accordingly, from £1 million to £1.03 million.

The Lifetime Allowance dictates how much you can hold in your pension before tax charges are potentially applied. For example;

• 25% lifetime allowance charge applies to funds in excess of the Lifetime Allowance if they are placed in drawdown or used for annuity purchase
• 55% Lifetime Allowance charge applies to excess funds if they are withdrawn as lump sums

2. Increased Personal Allowance

The Personal Allowance is the income you can receive each year before starting to pay Income Tax. It's currently £11,500 but will be increasing to £11,850 in April. That means that, during the financial year 2018/19, you can benefit from an extra £350 tax-free income.

The government has previously announced that they are aiming to raise personal allowance to £12,500 by 2020.

3. Dividend Allowance decrease

Although the change was announced in early 2017, the dividend tax-free allowance will fall from £5,000 to £2,000 at the beginning of the next tax year. This means that business owners and contractors who work for a limited company structure will pay tax on annual dividends of more than £2,000.

4. Auto-enrolment contributions increase

Automatic enrolment for all eligible employees into workplace pensions reaches its final stages for existing employers this year. In addition, the minimum contributions made by both employees and employers will rise.

Currently, both parties are required to contribute 1% of qualified earnings. However, from April, this will increase to a minimum of 2% from the employer and 3% from the employee. And will rise once again in April 2019 to 3% for employers and 8% in total.

5. Help to Buy ISA / Lifetime ISA transfer deadline

Any deposits made into a Help to Buy ISA before April 2017 can be transferred into a Lifetime ISA (LISA), without impacting the annual Lifetime ISA allowance until 5^th April 2018. This could give you a double bonus. You can put twice as much into your LISA this year, and still receive the 25% bonus when you buy a house or retire.

6. Basic State Pension increase

Each year, the Basic State Pension increases in line with whichever is higher out of:

• The rate of Inflation
• Average Earnings growth
• 5%

This is known as the triple lock system.

In October 2017, inflation reached 3% and set the bar for the State Pension's 2018 rise.

If you already receive a State Pension, this is good news. Those people entitled to a full basic State Pension will now receive an extra £4.80 per week.

7. Higher Income Tax rates in Scotland.

In the 2017/18 tax year, Scottish Income Tax rates for earned income are:

• Up to £11,500: Tax-free Personal Allowance
• £11,501 to £43,000: 20%
• £43,001 to £150,000: 40%
• over £150,000: 45%

However, from April 2018, proposals have been made to change them to:

• Up to £11,850: Tax-free Personal Allowance
• £11,850-£13,850: 19%
• £13,850-£24,000: 20%
• £24,000-£44,273: 21%
• £44,273-£150,000: 41%
• Above £150,000: 46%

This is quite a difference which will affect Scottish taxpayers at all income levels.

Making the most of the 2018/19 financial year

A lot of changes are happening at the beginning of the new financial year. So, make sure that you are informed and able to maintain your financial security when they come into effect. The three main ways to stay on top of your finances are:

1. Staying informed
2. Knowing how the changes affect you
3. Seeking advice

For more information about how the new financial year could affect you, contact us.

by danielashby

2018: A big year for auto-enrolment

2018 marks 10 years since auto-enrolment was first debated in 2008. As the new financial year approaches, we look at what April 2018 has in store for workplace pensions.

What is auto-enrolment?

Introduced into law in 2011, auto-enrolment will be in its final roll-out phase this year. This means that, from April, eligible employees from all sizes of business should be included in a workplace pension (unless they have chosen to opt out).

Eligible workers are those who:

• Are aged between 22 and the current State Pension Age (which you can check here)
• Meet or exceed the earnings limit. This is currently £10,000 or more each year/£833 per month/£192 per week, but this is reviewed yearly and may to change
• Have a contract of employment (i.e. subcontractors and non-contracted partners will not count)

Employees who do not fit these criteria can ask to join the workplace pension on an individual basis.

The end of the five-year phase-in period

Since auto-enrolment came into effect, nine million people have been enrolled; one million of whom joined during 2017. (Source: Department for Work and Pensions (DWP)) During the first few months of 2018, small businesses will be joining the ranks as part of the final stage of auto-enrolment's introduction.

February 1^st is the final phase-in deadline. After which, all employers will be under immediate duty to enrol new staff members who are eligible.

Contribution changes

Perhaps the biggest change we'll see, is the change to the minimum contribution levels. Currently they are:

• 1% employer contribution
• 2% total contribution (meaning at least 1% employee contributions if the employer pays 1%)

From April, the minimum contribution levels will rise to:

• 2% employer contribution
• 5% total contribution (meaning at least 3% staff contribution if the employer pays 2%)

12 months later, in April 2019, these minimum contributions will increase once again to:

• 3% employer contribution
• 8% total contribution (meaning at least 5% employee contribution if the employer pays 3%)

Many companies and experts have expressed concern that raising the minimum contribution amounts will encourage employees to opt out of their workplace pension.

Currently 10% of people opt out, but experts have warned that the number could rise to 21.7% in 2018 and 27.5% in 2019 (source: Your Money).

However, it appears that those worries may be unfounded, as just 4% of people have made up their mind to leave their workplace pension when the increase comes into effect. Fortunately, half of employees are committed to their scheme:

• 50% will definitely stay in their workplace pension
• 34% are unsure what path they will take
• 12% will consider leaving their scheme
• 4% will definitely opt out

(Source: Aviva)

What's almost certain, though, is that those who opt out will face a financially difficult retirement.

Other potential changes

In late 2017, the Government indicated that they would extend auto-enrolment to those aged 18 and over. However, this won't happen until the mid-2020s. Currently, employees who are under the age of 22 must request to join their employer's workplace pension. While those under the age of 18 will not usually be eligible for employer contributions to their scheme.

It is estimated that lowering the minimum age threshold will mean that 900,000 more people will be automatically enrolled into a workplace pension.

If you are a business owner, employer or employee, to discuss how the pension changes might affect you, feel free to get in touch.

by danielashby