It looks like personal accounts are going to brought in by the government although yesterdays announcement is going to delay things by a year. This is the follow up to the flawed stakeholder schemes. It is reported that the introduction of this will go ahead despite any change in government.
Key Issues for employers:
- As of 2012 all employers will need to set up a pension scheme for all staff*
- All employers will need to fund at least 3% of earnings for every member of staff. (contribution are to be phased in and are still under consultation)
- Every employee* will be automatically ‘signed up’’ into the company scheme.
- The scheme will be administered by all companies.
- There will be no waiting period – all employees will join day one.
- Every company will need to set up a government ‘personal account’ scheme for their staff or an acceptable alternative.
- No commissions are payable to advisers through the governments scheme – advice costs will be paid by the employers to their advisers.
* The only exemptions will be low earners (around £5k per year) but even these people will need to be offered entry to the scheme.
Key Issues for employees:
- Every employer will need to offer a personal account scheme or alternative.
- All schemes will involve an employer contribution of at least 3% of earnings.
- All schemes will require a total contribution of 8% of salary. This made up of the employer contribution and the employer contribution.
- Tax relief will be available on the contributions for both employer and employee. (The employer contribution will be able to offset as a business expense of course, but the tax relief for the employee is given by the way of 1% Government contribution)
Key facts about the Governments ‘Personal account’ pension plan:
- Retirement dates will be the same for every one – set by the government
- The personal account will be run by a new organisation set up by the government
- There will be no investment choice – it will be managed by the governments body
- There will be no transfers in or out. Once the money is invested in the scheme you have no choice or options.
- All companies will have the option to set up an alternative scheme that will need to meet certain criteria. These schemes will provide flexible retirement dates to suit individual needs, choice of investment options, options of transfers and other features that are familiar today.
Reeves Independent Services
- We will continue to provide advice to our company clients with regards employee benefit programmes.
- We will ensure existing schemes meet the criteria.
- We will help new company clients set up the scheme in the best way to suit.
The above information is based upon the latest information and details are subject to change.
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