Compulsory pensions to be brought in for all from 2012
The Government, as part of its reform of pensions, is to introduce a national system of ‘personal accounts’ from April 2012.
From this date all eligible employees, who are not already in a good-quality workplace pension, will be automatically enrolled by their employer into a personal account although they will have the ability to opt out. Both the employer and employee will have to pay into it. Employers will not have to include employees in the new government scheme if they already include employees automatically into their own pension scheme which is at least as good as the new scheme.
All qualifying employers will be required to contribute a minimum of 3 per cent of salaries to an employee’s workplace pension scheme, although initial contributions will be phased in over three years. This will supplement the 4 per cent contribution from the employee and around 1 per cent from the government in the form of tax relief.
This is the first time that all UK organisations will be obliged to contribute to a pension scheme for their employees. There is worry that this may lead to the ‘levelling down’ of employer pension provisions which could see organisations reduce their contributions or shut more lucrative pension schemes in favour of the new personal account scheme.
Robin Ellison, head of strategic development at lawyers Pinsent Masons, told Caritas: ‘Since many charity workers are paid at the modest end of the scale it is important that they, and their employers, think very carefully about the issues raised by this new scheme. First it is almost certainly inappropriate for low-paid workers, since it offers uncertain benefits, may take employees out of the means-tested state pension credit system and will rely on as-yet untested administration. Finally, the long-term stability of the system is uncertain; there may be a change of government with different objectives between now and the time it is due to start and it may be that the Personal Accounts Delivery Authority may conclude the system is not workable. It might be best for charities to take note of the intention to introduce a new state scheme, but plan on the possibility it may be overtaken by events’. See also www.thepension service.gov.uk/pensions-reform/ personal-accounts.asp
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