NHF warns pension change set to triple costs for employees

By Kat Hill | 11 January 2018 | Expert Advice, Feature

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The National Hairdressers Federation, which supports the hair, beauty and barbering industries, is warning pension changes will triple costs for employers.

Pensions auto-enrolment was introduced in April 2012 and has led to nine million workers saving into a pension for the first time.   Since auto-enrolment was introduced, the contributions for both employers and employees have been set at one percent. However, from April 2018, pension contributions will increase to two percent for employers and three percent for employees, and they will increase again to three percent for employers and five percent for employees in April 2019.

The government has also unveiled plans to reduce the minimum age for enrolling staff from 22 to 18 in ‘the mid 2020s’ provided their earnings are over £10,000.  This will bring around 900,000 people into the pension system, and will further increase costs for employers who will need to make contributions for this age group for the first time.

There are also moves to calculate contributions on all earnings up to £45,000, rather than the current ‘banded earnings’ system which calculates contributions on earnings between £5,876 and £45,000.

“As well as the scheduled increases which will triple pension costs for employers over the next couple of years, future plans to include younger workers and to move away from contributions based on ‘banded earnings’ will further increase employer costs,” says NHF chief executive, Hilary Hall.  “These two measures will have a disproportionate impact on the hair and beauty sector because of the sheer number of young people working in our industry, while the banded earnings change will have a bigger impact for workers on minimum wages, also common in our industry.  We may therefore see more workers choosing to opt-out of pension contributions, which would defeat the aim of getting people into the habit of saving for retirement.”