The arrival of the new financial year saw two highly anticipated pieces of HR legislation finally come into force over the weekend – pension freedoms for the over 55s, and shared parental leave for new parents.
Couples who have babies (or adopt) babies after 5 April can now share up to 50 weeks of leave, and 37 weeks of pay in the first year of their child’s life.
Mothers still have to take a minimum of two weeks’ maternity leave following the birth of their child before returning to work, but while the new rules are expected to help more than 285,000 workers juggle their childcare arrangements, it has already been overshadowed by the Liberal Democrat’s election pledge to grant new fathers a guaranteed six weeks’ paternity pay.
This tripling of the standard two weeks’ paternity leave (at £139.58 per week or 90 per cent of the employee’s earnings if this is less), is thought to address concerns that shared parental leave is unlikely to dramatically change men-female parenting roles, as men still typically earn more than women. Countries that already offer shared parental leave have only experienced around a 5 per cent take-up.
Meanwhile, at the other end of the age scale, new rules mean over 55s can now access their pension pots in full rather than being forced to buy an annuity.
Government statistics reveal around 540,000 people will now be able to unlock a possible £140 billion’ of pension savings – with the average pension pot comprising £25,000. A further 300,000 employees will be able to cash-in their pots every year from now onwards should they chose to.
But the options available to savers are now considerably more complex – everything from maintaining the option to buy an annuity, to taking the whole pot in one go, keeping the money invested, to drawing an income from it in smaller tax-free chunks.
Concerns have being raised that without employer-led financial education programmes, older workers could squander their savings by taking rash decisions (or be at risk from being targeted by scammers). According to a recent study by Aegon, one third of over 55s are still unaware of the tax implications of taking all of their money all at once.
Pensions minister Steve Webb is urging savers not to see the new freedoms as a sudden dash for cash that needs to be taken quickly. He said: “Our pension reforms will mean millions more people will have a better retirement. But we want people to make informed choices. This isn’t a mad scramble.