ANOTHER GOVERNMENT WHITE ELEPHANT?

A COMPULSORY WORKPLACE PENSION

Regardless of political party, you can almost guarantee that each Government will change the pension rules when they come into office. This has been the case consistently for the last 40 years or so. New ideas are introduced, then changed, and then dropped completely. A good example is what was originally called the State Earnings Related Pension Scheme (SERPS) started in 1978. Its purpose was to augment the Basic State Pension for those who were employed. After some years it was found to be too expensive, and the Government sought to lure people out of it by making it possible for them to contract out of SERPS. This proved to be of little use in cutting costs and is now being wound up in the current tax year. By 2002 SERPS had been replaced by what is called the State 2nd Pension.

Confused? We do not blame you. So are the legislators.

So now what is around the corner? Now in their wisdom we have a compulsory pension scheme being introduced from 2012 which requires all employed persons to join it, and requires all employers to make it available to all of their staff AND CONTRIBUTE TO IT! This is called NEST (The National Employment Savings Trust).

Why? Certainly the average worker in the UK is not now making adequate pension provision, and the Government is seeking to do something about it because, otherwise, it knows that the costs of providing income assistance to the elderly is going to increase hugely. One of the main reasons that we have reached this point is that successive Government actions have made it too expensive for companies to continue to offer the good pension schemes they were able to provide in the 60s, 70s and 80s. The other factor is that people move jobs much more often now than they did in the past.

How will this affect you?

Self-employed? – It does not affect you. You can pay into a pension for yourself, or not, as you choose.

Employed? – If you are aged 22 or older and under age 75 earning approximately £6000 or more per annum, you will be automatically enrolled into the pension scheme of your employer (unless your employer is already providing a scheme at least as good). Both you and your employer will be required to contribute into the scheme. It will take a few years to phase in, but eventually it is intended that the employee contribute 4% of his wages and the employer adding the equivalent of another 3%.

Employer? – You will have no choice. Unless you have an alternative scheme in place providing benefits at least as good as the NEST scheme, you will need to set up a pension plan and deal with collecting the payments and automatically enrolling all of your eligible employees into it. You will be responsible for it being done correctly and there will be penalties for failure to do so.

To find out more you can go to www.nest.pensions.org.uk or www.thepensionsregular.gov.uk

We will be automatically assisting those companies whose pension schemes we look after and those individual clients whose pensions we look after. Those employers who will want assistance are welcome to contact us to explore how we may be able to assist.