Pension reforms could have big impact on retirement prosperity
- 7 October 2011
If you don't have a company scheme already and if you work at a large employer, from next year, you will be enrolled into a pension unless you actively opt out. You will be expected to contribute four per cent of salary, your employer contributes a minimum of three per cent though it could offer more boosting your pension or reducing your contribution, and the Government will provide one per cent in tax relief. Here is an explanation on the website of the Pensions Advisory Service.
Gradually in the years up to 2017 smaller and smaller employers will be required to offer a pension until most of the workforce is covered. You do not have to join the scheme but you do have to positively say you don't want to join, in a system known as auto-enrolment or soft compulsion. Employers are banned from trying to incentivise you not to join to save on their contributions and face severe penalties for doing so.
It is arguable that this is what the Prime Minister David Cameron might have had in mind, when he nearly suggested that the British pay down their credit card debt this week, before he changed the speech under pressure from the UK's retailers. But if this new pension scheme is going to work many people may have to find that extra four per cent. But it is employers and not employees that are already complaining about the burden.
On Pensions Age PwC says employers are wildly underestimating the commitment necessary.
- Car insurance premiums start to rise as fake whiplash claims continue to plague insurers
- Lenders cut mortgage rates to record lows
- Brits lose £670m per year to online fraudsters
- Pensioners could be hit with 45% tax charge shock when new freedoms kick-in
- Disappointment as Government's Pensioner Bonds will not pay monthly income
- Tesco chairman steps down as group confirms it actually overestimated its half year profits by £263m
- Prison or a fine for pensions guidance imposters
- Employees finally get a pay rise... of 8p
- GSK is a "buy", but pharmaceuticals still under pressure says Share Centre
- As Junior ISAs mark their third birthday, Child Trust Fund savers need to weigh-up their options