Roll Out Of 'Revolutionary' Pension Scheme
A landmark scheme that will automatically place millions of people into workplace pensions has come into effect.
Up to 10 million people are expected to be enrolled in what is hailed as the biggest pensions revolution since David Lloyd George ushered instate pensions a century ago.
The new automatic enrolment regime will initially affect only companies with 120,000-plus staff - many of them banks or supermarkets.
Firms with fewer workers wil be required to join over the next five years. Staff and employers will both pay into the plan.
Savers will typically need to put aside just over £2 a week to get them started, according to Nest, a not-for-profit pension scheme set up under the new rules.
In the first four years of the scheme, workers contribute a minimum of 0.8% of earnings which works out at around £2.37 a week for someone on an average annual salary of around £20,000, Nest found.
But for those on low incomes like Hannah Perry, it may still be a stretch too far.
"If I've got a bill to pay, I will look to other ways in which I can pay for it, out of the money I've got. So you start cutting your costs and a pension is the first easy one as it doesn't hit you for a very long term," she said.
Based on this average, employers will contribute nearly £3 per week as well and almost 60p will be added in tax relief, meaning the total going in is just under £6 a week, or around £25 a month or £309 a year.
But by 2018, as the minimum contribution increases, employees will be putting aside around £12 of their pay every week, in return for almost £9 from their employer and nearly £3 in tax relief, leading to average annual contributions of £1,235, Nest said.
Automatic enrolment aims to tackle growing concerns about an old-age poverty crisis, as people live for longer but fail to put enough away for their later years.
Joanne Segars, chief executive of the National Association of Pension Funds, said: "The UK is drifting towards an iceberg when it comes to paying for its old age, and we need radical reform like this.
"Crucially, this reform will reach those who have no pension: the young, the low-paid and those working for small businesses."
But some analysts have said the Government should go further in encouraging people to save, for example by making pensions more flexible so that workers can take some cash out if they need to or by increasing tax-free Isa allowances.
Ros Altmann, director-general of the firm Saga which provides insurance, holidays and financial services to people over 50, said this is a long-term aim - to tackle growing concerns about a poverty crisis in old age.
"It's really important for people to think carefully, for their later life financial support. They'll have a long period of retirement in most cases, they'll need money to look after themselves and it's not going to come by magic," she said.
An advertising campaign featuring TV stars such as Theo Paphitis and Nick Hewer was recently launched to raise awareness of the scheme.
what do you think?
Steven James Farmer
How is £25 a month going to turn into a viable if someone reaches pension age. Also what planet are these people on, average wage on 20k?
ive paid for thirty years, im a public sector worker. some paid, some didnt. im so glad i did. the job i do so hard, couldnt.work to 65 even if i wanted to. pay it in u.l be glad u did.
The main reason for introducing this is because, although we pay our stamp duties all our lives, there is nothing left for retirement because of the millions paid out to immigrants, asylum seekers and scroungers. Instead of making the workers pay stamp duty to the government let us have that money back and invested into pensions. That way it won't be stolen by those groups who don't deserve.
I'd question what you say on 2 counts, Richard. 1) National Insurance is not a tax; it is a ring-fenced insurance pot that can't be syphoned off in the way you suggest. 2) According to the Institute of Fiscal Studies, economic immigrants contribute on average 12.5% more in tax and NI than the indigenous population. It's true that asylum seekers get support (£38 per week), but this is because, historically, governments have not allowed them to work while their asylum cases are being reviewed. The annual number of asylum seekers is low (approx 30,000) and has a very small financial impact.This measure is being introduce entirely because of the effect of increased longevity on national demographics.
If any government tried to misuse ring-fenced capital, they wouldn't be able to conceal it for long and the press would have a field day.
As usual the 5 million Underclass will be left to rot. Two pounds a week is a lot of money to some people, it can mean going without food or warmth for a day. The tangible, palpable hatred I feel for the British state is matched only by the disgust I harbour for the faceless capitalistic policies that the politicians employ. Soon poverty levels in this country will reach Victorian levels. . .
At the moment 50% of the population works and 50% doesn't. By, 2050, largely because of people living longer, it is estimated that this ratio will become 25% against 75%. It's obvious therefore that you need to ensure that the large proportion of pensioners amongst the 75% are less reliant on state benefits to bolster their state pensions. There's a mixture of measures any responsible government can take to prepare for 2050 (and before) - increase taxation, raise the retirement age, make older people more self-sufficient, increase the birth rate, encourage immigration etc. These measures are all unpopular, but some or all of them will be implemented whether you live in a capitalist society or not.
Irrelevant, Mick. The human race will destroy this planet and, consequently, itself by 2050.
A very good post indeed Mick..but any increase in the birth rate will only work if there is a corresponding increase in jobs with a liveable salary (or hopefully better!). The same applies to immigration, of course.
I understand your concern, Anthony, particularly in these days of dark recession, but I think that the point to remember is that 10 years agowhen the economy was booming, we struggled to find people to fill jobs particularly in certain skilled areas and this problem will be exacerbated when the economy picks up again and more people are retiring than the number coming in to employment. Research units across Europe have highlighted that there'll be a shortage of employable workers in the coming decades.
A very good point Mick, and I do remember the skills problem (not so very long ago!), one could find a job commanding what now seems quite a reasonable salary in those days! The immediate problem is that by the time things turn around again which, as you say, research suggests it will, millions of people will have been unemployed and/or massively under employed for decades. By then these individuals will have exceeded a realistic working age having had no chance whatsoever of contributing towards their pension fu nds for the preceeding 20 years (or so). You may have guessed that I'm one of them!!
If you say anything about Cameron then Orange block it
You just said something and they havent blocked it. mrs hakes, why would Dave be bothered with a REMF such as yourself ?
Public sector pensions are vast but they pay nothing for them
what are you on about. i do every month thankyou.
Private sector pay is vast bit they do nothing for it.
Oooh, Jonathan. I see you've had your random made up number machine upgraded with the gibberish add-on. Very shiny.
Doug - where on earth do you get the idea the 'private sector pay is vast'? The people on vast pay is minimal - most of manufacturing is struggling to survive and have not been issuing rises for around 6 years since the phones went dead! Most of our employees cannot afford a vehicle to get to work let alone a pension contribution.
Well said, David. I have not had a pay increase for six and a half years. In fact, our pay was cut by 20% in September 2011.
Well said Dave and Derek, I am now paid 55% of what I earned in 2008. For doing the same job, I might add. (Private sector, of course!)
Dave,Des,Tone....agree 100% private sector keep the country afloat. doug......WHAT !!!
It is not supposed to stimulate the economy, it is supposed to encourage people to save instead of spend money they don't have.
I know what you meant Andrew. Don't take any notice of mrs hakes, sarcasm is her middle name. Save instead of borrow and spend. Exactly the behaviour that has got so many into a mess.
Calm down mrs hakes, remember dear, that you have only just recovered after your last explosion. Terrible mess, blood all over the place.
The iniquity which some people feel can be explained in this way. Take two people, one in the private sector and one in the public. If they start work at the same time, pay identical contributions and retire at the same time, it is generally perceived that the public sector worker will have the larger pension. So far I have never seen this disproved.
There would also appear to be a much larger proportion of public sector workers electing to take early retirement than those in the private sector. Presumably, this must be because their jobs are so much more demanding(!)
keep on deluding yourselves boys. If it makes you feel better then so be it.
All the low paid gov jobs have been privatised leaving only higher paid jobs, police, doctors, lawyers etc. Thats why they have a higher pension. Stop reading the Sun and start using your head.
I wonder how many of the people opt out due to not eing able to aford the deductions. It should be interesting as I believe a high number will due to affordability
I saved for my retirement now I get to pay income tax, council tax, dental treatment, loft and wall insulation. I'm no better off but the government are. That's what this is all about.
how are the government better off ?
This is just a job tax, employers will look at the overall cost of employing someone which will include the employer's contribution obviously. So instead of giving the money in total to the employee - part goes to the pension pot. Make no mistake you will not get the same state pension when you retire if you have this "new" pension to come. Where as a scrounger who wont work will get more state pension than you - subsidised by your loss in state pension. Stop meddling in private lives please ............another example of capitalsim being held back by socialistic meddling by government
Like all pension schemes you pay in all your working life and get out far less. Unless your really healthy after you reach 70 this is just a waste of money For people paying in but a huge stealth tax for the government
wrong again. get some facts in your head. this really can work for people who understand the principle of paying for yourself. believe me jonny, you dont want to be relying on the state pension.
Just another stealth tax by a government who don't have any morals about robbing The working man and telling him it's good for him
my goodness. you really should read the item. this is a private pension. the gov take nothing it goes to private pension f_unds run by companies such as HSBC. In fact you can get tax back from the govern,ent if you pay in. Consider yourself shot down in flames, and the fools who gave you a thumbs up.
How does this affect part time, agency workers, as their numbers have exploded under this regime, along with the jobless
It affects part timers in exactly the same way. you pay in and you get it out when you retire. What did you expect to happen under this "regime" they are not miricle workers. It will take years to undo the damage of the labour incompetents that played their part in destroying our country.
This is just a tax collecting scheme, most will die before you can claim it, management fees will rise and the final amount will by you a pint of beer to cry into. With firms having record profits with smaller work forces, makes you wonder how they managed to offer pensions in the first place!