Government pension auto-enrolment scheme starts<\/p>\n
Firms with 120,000 employees or more will today start automatically enrolling their employees into a workplace pension scheme unless they chose to opt out.<\/p>\n
Both employers and workers will contribute towards the scheme, which
\n will be rolled out to all firms, regardless of size, by February 2018.<\/p>\n
It aims to ensure that lower earners will have a workplace pension to complement their state pension when they reach retirement age.<\/p>\n
With life expectancy increasing, the government is taking steps to prevent a pension crisis in the future, with many people facing poverty in old age.<\/p>\n
All workers over the age of 22, earning at least \u00a38,105 a year, will automatically contribute to the new scheme unless they chose to opt out or unless they already contribute to a workplace pension.<\/p>\n
The amount they contribute will be based on their earnings, but earnings below \u00a35,564 a year or above \u00a342,475 will not be taken into account.<\/p>\n
Initially, workers will contribute a minimum of 0.8 per cent of their pensionable earnings and their employer will contribute the equivalent of 1 per cent of their employee\u2019s earnings to the scheme.<\/p>\n
A further 0.2 per cent will be added by tax relief.<\/p>\n
Nest, a not-for-profit pension scheme set up under the new rules, estimates that a worker on a salary of \u00a320,000 will contribute \u00a32.37 a week to the scheme, their employer will contribute \u00a33 per week and 60p will be added in tax relief.<\/p>\n
This adds up to a total contribution of \u00a3309 per year.<\/p>\n
Eventually, workers\u2019 contributions will increase to 4 per cent, employers\u2019 contributions will increase to 3 per cent and tax relief will account for 1 per cent, adding up to a total contribution of 8 per cent.<\/p>\n
The new scheme has been widely welcomed by the pension industry.<\/p>\n
Joanne Segars, chief executive of the National Association of Pension Funds, said: \u201cThe UK is drifting towards an iceberg when it comes to paying for its old age, and we need radical reform like this.<\/p>\n
\u201cCrucially, this reform will reach those who have no pension: the young, the low-paid and those working for small businesses.\u201d<\/p>\n
Meanwhile, Labour leader Ed Miliband has called for a 1 per cent cap on pension charges.<\/p>\n
The Guardian reports that Mr Milliband told delegates in Manchester that pension companies take \u201cthousands of pounds in hidden fees and charges\u201d from retirement funds.<\/p>\n
source: www.financemarkets.co.uk<\/p>\n","protected":false},"excerpt":{"rendered":"
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