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.
- Falling UK real wages cannot be covered up with housing market subsidies forever
- Government to abolish 55% death tax on pensions
- Mindful Money's weekly shares watch: Sainsbury’s, Wolseley & Compass
- Three stock picks from F&C European Small Cap manager Sam Cosh
- UK property market eases back as new borrowing rules start to bite
- Osborne's move to abolish 55% tax on inherited pensions: Expert reactions and commentary
- Just one year to go before Britons can get up to £1,300 a year in State Pension top-ups
- Millions of UK workers now relying on their employers for retirement planning advice
- UK supermarket shares: "Things are likely to get worse before they get better"
- Pensioners earn average of £4,000 from their homes in past three months