PFRDA

Come 2012 you will be contributing 4% of your wages. Can I have your thoughts on this?

The Pensions Act 2008 puts into law the reforms to the private pension system set out in the White Paper. From 2012, employers will automatically enrol eligible workers’ between the ages of 22 and State Pension Age who are not in a qualifying scheme into a qualifying workplace pension scheme (which can include the new ‘personal accounts’ scheme). Automatic enrolment means instead of choosing whether to join a workplace pension scheme provided by their employer, all eligible workers will have to actively decide not to be in a scheme, if for any reason they feel this is not a suitable form of personal saving for their situation. For the first time all employers will be required to contribute a minimum of 3 percent (on a band of earnings) to an eligible employee’s workplace pension scheme. *This will supplement the 4 percent contribution from the employee and around 1 percent from the Government in the form of tax relief. http://www.dwp.gov.uk/pensionsreform/pensions_act_2008.asp

Public Comments

1. it sure does sound like a scheme.
2. Now being retired, all my working life a part of my pay was with-held towards my pension, being met by a similar contribution from my employer. Later, you could 'opt out' of this scheme. It is nothing new, just an old system rehashed.
3. The democracy will cease to exist when you take away from those who are willing to work and give to those who would not. Thomas Jefferson
4. That's what happens when the population is ageing and not enough workers are entering the workplace, Japan are going to feel the pinch too in a few years. I'm not happy about losing more money, (if this is an actual increase on previous pension contributions) to taxes but as you say there is still an opt out, so those that choose private pensions/other options are still able to opt out.
5. A good question, and very contentious issue. This won't necessarily affect individuals who already pay into a pension scheme. It is designed to ensure that those who 'can't be bothered' or 'forget', 'don't get round to it' etc who have no retirement provision and who don't intend on contributing to a retirement plan have the opportunity to do so. I think it is generally a good idea. Even if the option exists to join a pension scheme, there will always be people who claim never to have been told about it etc. Far better to be proactive and opt everyone in to the system automatically, then if you opt-out, there is no-one else to blame if you find that you haven't enough income in retirement. Anyone already contributing to a pension scheme, or who doesn't want to join, can always opt-out. The problem is that paying 4% of earnings isn't really going to amount to a great deal at retirement anyway. For some people who are always likely to be low-earners, they may be entitled to Pension Credits at retirement anyway, so could end up paying money into a pension fund to receive an income that they would have received anyway. It's a good idea to try to increase the amount of pension provision and reduce the burden on the state system, but I can't see it being successful. The majority of people who fail to make adequate retirement provision tend to argue that they can't afford even a modest contribution, and will end up opting-out or cancelling these plans. I read somewhere that the average term of a pension plan in the UK is only 12 years; what hope is there of encouraging 22 year-olds to keep a pension for 46 years!!