Pensions: plans for automatic enrolment of workers get green light

Every UK business should offer a company pension scheme from 2012 and automatically enrol employees earning more than £7,500 a year, a government report recommends.

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by Michelle McGagh on Oct 27, 2010 at 08:39

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Pensions: plans for automatic enrolment of workers get green light

Every UK business should offer a company pension scheme from 2012 and automatically enrol employees earning more than £7,500 a year, a government report recommends.

The government review of auto-enrolment recommends that workers be automatically enrolled into an occupational scheme, no matter how small the company. Workers will be able to choose to opt-out of the scheme, whcih is called the National Employment Savings Trust, or Nest.

The Pensions Act (2008) stated that employers should provide an adequate pension scheme for eligible employees – those aged 22 or more and earning at least £5,035 a year. If a company does not provide a scheme, employees will be auto-enrolled in and employers forced to make a minimum contribution. Today's Department for Work and Pensions report increases the minimum entry level to £7,500.

The report says employers should be given three months before staff are auto-enrolled to ease the burden on companies employing a large number of temporary employees.

If staff choose to enrol before the three month period then companies will have to make contributions.

Criticisms

The ‘Nest’ pension scheme, originally named 'Personal Accounts' under a plan devised by the previous Labour government, got the coalition's go-ahead in the small print of the coalition’s Spending Review.

This follows months of speculation over whether Nest would be scrapped. Critics of the scheme say that workers will choose to opt out rather than pay the minimum 4% contributions. Employers have expressed fears about the costs and many are likely to level-down - reduce future pension contributions into existing and new schemes - to meet the additional cost of newly pensioned employees.

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6 comments so far. Why not have your say?

Whats the point of the scheme if you can opt out?

Why not start employee contributions at 2% and increase to 4% over say 5 years but make it compulsory to stay in.

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This scheme is a tax by another name.

It gives no guarantee of a pension. That depends on investment returns and annuity rates.

The pension could be zero.. Could be much more.

It is also a fund which the Government can raid at any time. This has happened in many countries.

My advice to an individual. This scheme is too risky. Do not touch it.

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This is not a pension scheme, it is just another tax on employees and employers, the ridiculously high NIC contributions already made by employers and employees are for what ......

How gullible are the British general public.

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Looking at what has happened to existing pension schemes, as well as to savings accounts, I will be advising my nearest & dearest to keep away from the banks, & not let any government con them into taking up schemes which are raided by the tossers (politicians & financial institutions) at anytime they want to raid the savings.

Foolishly, in a pension scheme, which will no doubt be reduced as the tossers see fit - will not let my children go the same way.

The next best thing is to stash their savings in the mattress - it worked for gran & grand dad!

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I do not trust Government or Financial Institution. It does cost me in charges

of 20% and my Pension is less then what I have paid over years.I would have

been better off investing myself with no restriction.

M. Shah

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P Williams

Oct 27, 2010 at 20:15

Agree with Jonathan Court - what are NIC for? Also, this Governemnt are now talking about stealing any SERP contributions to pay for their grand idea to increase pensions for ALL - don't trust any GOVERNMENT or Insurance company with your hard earned cash is the hard lesson that I have learn't.

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