Keeping you ahead of change..pension saving accounts
Monday 8 September 2008
The Olympics aren’t the only thing happening in 2012. You may or may not have heard, but the Government is planning to bring in a new system for pension saving in April 2012 called ‘personal accounts'.
So why are they doing this? It’s a well known fact that people simply aren’t saving enough for retirement. By launching personal accounts the Government hopes to increase the number of people saving. Most employees will have to be automatically enrolled into a pension scheme. This will help overcome many of the current barriers to joining a pension plan in the first place.
What does it mean for employers?
Although the fine detail of personal accounts is not yet known, the shape of the scheme is becoming clearer. Here are the facts so far:
You will have to enrol all your employees aged between 22 and state pension age, earning more than £5,035 per annum, into either a ‘good’ pension scheme or a personal account. A ‘good’ pension scheme is one which has at least the same contribution levels as personal accounts.
Employees younger than 22 or older than state pension age can opt-in.
You’ll be required to make a minimum contribution of 3% of pay, sitting alongside a minimum employee contribution of 4% and 1% from the Government in the form of tax relief.
What does it mean for employees?
If you’re aged between 22 and state pension age, and earning more than £5,035 a year, you’ll be automatically joined by your employer. Your employer may offer their own company pension plan rather than personal accounts, and if this is the case, you may be automatically joined to this instead.
Because you’ll be automatically joined into either personal accounts or your employer’s company pension plan, you’ll have the option to opt out. This means you’ll have to let your employer know if you don’t want to be a member of their pension plan. However, because it’s unlikely that your circumstances will stay the same, if you choose to opt out you’ll be re-enrolled by your employer after 3 years.
If you decide to stay in your employer’s pension plan or personal accounts, your employer will be required to make a payment to your pension pot of at least 3% of your pay. Under the personal accounts scheme you’ll also have to make a 4% payment, and the Government will make a 1% payment in the form of tax relief. If you qualify for additional higher rate tax relief you can claim this too.
Personal accounts will offer a basic retirement solution so if it’s your objective to engage and retain your employees, while giving them flexibility in the future, then it may not be the right option for you. For example, personal accounts are unlikely to have the same range of features and benefits that your current pension scheme provides to you and your employees, such as high quality customer service, wider investment choices and different retirement options.
A useful web site for information for employees, employers can be found at www.standardlife.co.uk/keepahead.
Categories: Retirement Planning
posted by Murray Round Wealth Management @ 11:45,
The Authors
Nicholas Round
Nic is the Managing Director of Murray Round Wealth Management Limited, who seeks to ensure the advice provided is truly independent. Based in Shropshire with clients local, national and worldwide, Nic has strived to find the best possible service for his clients needs, by researching and studying the market, trends and philosophies. Nic strongly believes Asset Class Management will bring his clients Financial Freedom, Independence and Happiness.
Kirsty
Kirsty is our communication guru. Managing information requires considerable due diligence and her passion for organisation gives the clarity we all seek. From Shropshire, with a Psychology Degree and much travelling, she is now back in Shrewsbury...and London often, keeping us all at Murray Round focused.
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