Pension auto-enrolment good move for workers
It would be a mistake to opt out of an employer’s pension scheme when auto-enrolment is introduced, according to Tom McPhail, head of pensions research at Hargreaves Lansdown.
Auto-enrolment is being introduced from October 2012, when workers will be automatically enrolled into a qualifying pension scheme run by their employer.
Auto-enrolment is being introduced by the government because many workers fail to join their employer’s scheme and therefore miss out on pension benefits and Mr McPhail is calling for workers to take advantage of the contributions employers will make to their pensions, which will generate extra income for their future retirement.
However, there is growing speculation that the deadline for firms with fewer than 40 employees to start auto-enrolment could be delayed by one year.
The Sunday Telegraph reported rumours that the Chancellor could announced the delay in his Autumn Statement this week, as part of the government’s efforts to reduce costs for small businesses.
It is estimated that over a million small firms could be allowed to delay launching auto-enrolment, a move which would run counter to the Government’s efforts to encourage people to save more for their retirement.
The introduction of auto-enrolment by all UK companies could cost the private sector around £3 billion and a delay for smaller firms was recommended by Adrian Beecroft, chairman of Dawn Capital, in a report to the government.
Under the auto-enrolment reforms employers will be free to choose the qualifying scheme they use and will have to make a minimum contribution of 3 per cent of an employee’s qualifying pensionable earnings.
Employers will pay contributions on employee’s earnings from £5,035 to £33,540.
Workers aged between 22 and state pension age, who earn above the income tax personal allowance will be eligible for the scheme.
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