Millions of people are not saving enough to have the income they are likely to want in retirement. Life expectancy in theUKis increasing and, at the same time, people are saving less into pensions.
Starting from October 2012 employers will automatically enrol their workers into a workplace pension if they meet certain criteria. This will help to address the issues that prevent people from saving into a pension.
Q. What is happening?
A. Employers will have to enrol all staff between 22 and the state pension age and who earn more than £8,105.
Firms employing more than 120,000 people will be the first to auto-enrol workers from October 1. Small and medium-sized firms will sign up staff in stages from spring 2013.
All eligible workers will be enrolled by 2018.
Q. What will I have to pay?
A. Employers will initially contribute a minimum one per cent of a worker’s pay into a pension scheme, matched by a one per cent contribution from employees including tax relief at the basic rate of 20 per cent, or 0.8 per cent of net pay. This rises to two per cent from the employers and three per cent from the employees in 2017 and three per cent from the employers and five per cent from the employees from 2018.
Q. Can I opt out?
A. Yes, but you must tell your company within one month of your firm’s scheme starting. Any contributions will then be repaid to you. You must also choose to opt out every three years or face being automatically enrolled again.
You can stop paying into a scheme at any time but your contributions will be retained and paid on retirement.
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