Posted: Tue Dec 12, 2006 8:10 pm Post subject: Government unveils new Pension Scheme.
Plans for the automatic enrolment of workers into a new pension system have been unveiled by the government.
From 2012, workers not in occupational pension schemes will be enrolled in "personal accounts" unless they opt out, under the White Paper's plans.
Staff will pay in 4% of their salaries and employers 3%, with an extra 1% from the government in tax relief.
Ministers believe the new scheme, called personal accounts, will boost annual pension savings by up to £8bn.
The proposals affect up to 10 million workers who are not in employer-funded schemes.
Launching details of the scheme, Pensions Secretary John Hutton said its aim was to overcome "the inertia and short-termism" which was stopping people making financial decisions, particularly in low-income households.
The system's key features are that employers will be forced to contribute if their staff join up and individuals will keep their accounts when they move jobs.
'Cheap to run'
The government argues that the personal accounts will be cheap to run.
Responding to fears that accumulated pension savings will simply erode entitlements to means-tested pension credits, ministers estimate that by 2050, nine out of ten pensioner households will benefit if they save in personal accounts.
PERSONAL ACCOUNTS EXPLAINED
Employees compelled to join the scheme, unless they already have a good workplace pension or choose to opt out
Employees can pay in a maximum of £10,000 in year one and £5,000 in future years
People will not be able to transfer funds from existing pension plans
Contributions will be collected centrally and paid into investment funds
Start date for personal accounts will be 2012
Personal accounts part of a wider pension shake-up involving a raising of the state pension age to 68
"Without an increase in private savings, future generations could retire poorer than today's pensioners and poorer than they expect to be," the White Paper said.
The government hopes the scheme will help plug the gap in the nation's retirement savings and supplement the continuing state pension and private pension systems.
The idea was first proposed by Lord Turner's Pensions Commission to ensure that more people save for retirement.
The new scheme will be set up by a delivery authority and then run by an independent personal accounts board similar to a set of pension fund trustees.
Women 'benefit'
About 12 million people are currently estimated not to be saving enough for their retirement.
Michelle Mitchell, of the charity Age Concern, said the new pension system would be particularly beneficial to women.
There has been a great deal of employer and industry lobbying to weaken crucial aspects (of personal accounts)
However, the TUC has warned that some employers may put pressure on staff to opt out of the scheme in order to avoid paying their contributions.
"There has been a great deal of employer and industry lobbying to weaken crucial aspects," said TUC general secretary Brendan Barber.
BBC Economics Correspondent Hugh Pym said there was "broad acceptance" of the plan from industry groups, but that some small businesses had objected to the idea of compulsory contributions.
Breaking consensus?
The government has spent a lot of time and effort trying to win support for its main policy of raising the value of the state pension in line with earnings rather than inflation but paying it later, from age 68.
But on personal accounts there has been some concerted criticism.
Lord Turner's Pensions Commission was behind the new pension idea
The Lib Dem shadow work and pensions secretary, David Laws, said the accounts would be of little benefit to anyone who was self-employed or who spent time out of employment.
"The huge number of means-tested benefits which accompany them will lead to many people losing up to 85 pence of every pound that they save," he said.
The National Association of Pension Funds (NAPF) has warned that companies with more generous schemes could be tempted to level them down to match the new accounts.
It urged ministers to ensure the plans complemented rather than replaced existing schemes.
Some small businesses have also objected to the idea of compulsory contributions.
And I read today that there is no 'guarantee' with the savings, so if the investments do not do as well as expected (or even go belly-up) there will be no comeback. _________________ If I can't be a good example I'll have to settle for being a horrible warning.
I can understand some small employers not being too happy if they are compelled to contribute a persentage to scheme. As a previous salon owner and employers myself I can appreciate how dificult it can be to meet so many financial demands, I think a lot of small businsses will suffer and go under yet again. I am so glad now that all that is behind me. _________________ The purpose of life is a life of purpose
Me too, Dora. I used to run my own garage/workshop, and employed three people, two full-time and one part-time.
It was a nightmare then, so I shudder to think what it's like now. They are effectivly putting a lot of small businesses out of buisness!
You cannot post new topics in this forum You cannot reply to topics in this forum You cannot edit your posts in this forum You cannot delete your posts in this forum You cannot vote in polls in this forum
