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Introduction of workplace pension schemes

The new government has now confirmed that they will be pressing ahead with Labour's plans to force employers to provide workplace pension schemes. This means that all employers, regardless of size, with staff earning more than £7475 per annum will have to set up a pension scheme and both the employee and the employer will have to contribute.

Brian Butcher, Director at Ideal Financial Management and pension specialist say’s that “It will be interesting to see how employers absorb these extra labour costs, especially as employees will be automatically enrolled into a workplace pension and will have to voluntarily opt out. It’s therefore clear that the government are relying on inertia to stop people opting out in the same way that inertia has previously stopped people providing for their retirement. ”

All employees will be enrolled only after working for three months, unless they ask to join earlier when the employer is required to permit this. For companies that don’t comply fines will be issued

The scheme will come into force from 2012 for employers with more than 250 employees and will cascade down to the smallest employers by 2017. The contribution amounts could still change but, at present, the contributions will start at 1% for employers from 2012 rising to 3% from October 2017. Employee contributions will start at 1% rising to 5%.

Brian Butcher continues “At present we have a pension time bomb on our hands. The baby boomers are retiring putting heavier burdens on the state, we are living longer and yet 7 million people in the UK are not saving for their future. It probably makes it easier therefore to use the employer as the ‘net’ to catch these people.

For more information on the workplace pension scheme and to see how it affects your company Brian can be contacted on 01302 880140 or email brian@idealfinancialmanagement.co.uk