Personal accounts
The current plans for Pensions reform consist of a package of changes to both state and private pensions. The aim is to get more people to save more for their retirement.
It started three years ago with the Pensions Act 2007. The second stage of the reform is the Pensions Act 2008, which set out:
- the new pension responsibilities for employers from 2012, and
- the establishment of a new personal retirement account scheme, known as the National Employment Savings Trust (NEST)
A lot of the detail has yet to be finalised – it’s been left either to secondary legislation or to the Personal Accounts Delivery Authority to formulate during 2009 and 2010. However, it’s clear that pensions reform will completely change the face of the pensions industry in the UK.
Please note information on this site is based on our current understanding of the legislation (some of which is draft), which may change.
The basics
The new employer responsibilities under pensions reform are built on two principles:
- the auto-enrolment of working individuals into a pension scheme, and
- compulsory pension contributions by employers
These two principles are quite complex and, as an industry, we need to get up to speed with the concepts and the new terminology. Let’s have a brief look at these.
The auto-enrolment of working individuals into a pension scheme
Auto-enrolment
Auto-enrolment means that an individual is automatically enrolled into a pension scheme and doesn’t need to do anything or make any decisions, for example choose a fund or sign an application form.
Working individuals
The new legislation defines working individuals as workers and jobholders. Employers have different duties towards their employees depending on the criteria that each employee meets.
A pension scheme
Employers can choose to auto-enroll jobholders into a qualifying auto-enrolment private pension scheme or into the government’s National Employment Savings Trust.
Compulsory pension contributions by employers
The total minimum pension contribution that needs to be paid into a scheme is 8% of qualifying earnings, with the employer needing to contribute at least 3%. Our team of advisers at Samuels Financial will be able to give you the latest information about UK pensions reform and advise you on your individual circumstances and of course the impact that decisions you make will have on your business going forward.
