
This is a little bit teckie but it likely to be of even greater long term significance to real people, than the current fuss over the improvement to personal tax allowances for low and middle income Brits.
The EU has
allowed the government to extend the scope of auto-enrolment into contract pension schemes as well as trust schemes. The government will amend the 2007 Pension bill to allow for auto-enrolment from 2012. It was previously thought that this compulsion was illegal under EU regulations. This alone will affect some
4.7 million employees.
Okay, what this means is that in 2012, the government can now introduce a nation wide auto-enrolment scheme for all employed workers. If someone works for a company that has its own pension scheme they will be automatically enrolled in that scheme. All other firms that do not offer a pension scheme will have to auto-enrol employees into a Government sponsored Pension Personal account. Employees can pull out of the scheme but every year they will be enrolled back into it again.
The above paragraph is possibly amongst the most boring I have ever written. Co-incidentally I was just distracted by a sketch on TV from the show “
Smack the Pony” where 2 women fell asleep as soon as their accountant started talking about pensions and tax allowances.
Bear with me as I think this issue is important. For the first time potentially all workers will end up with a lifelong private and state pension scheme. As always there is lots to moan about for example: – it should be compulsory for all workers and self employed, the contributions paid by employers is too low, investment risk is not shared, carer pensions etc.
However, nowadays, even in companies with pucker Final Salary schemes, up to a third of employees are not members of the company pension scheme. Losing the equivalent of at least 10-15% of their wages each year.
A little while ago I helped a union member go through her pension options with a company which only offered a group personal pension plan. The company will pay into a pension if the employee also contributes. She was horrified how many £1,000’s she had lost out in company contributions by not taking out the pension sooner. She had never "got around" to setting it up. She would have far preferred being enrolled when she first joined the company. The industry has a saying that pensions are "
sold not bought".
For the first time ever in the history of this country, with cross party support, we could be just about to introduce a sustainable arrangement for a national pension scheme that covers all workers. This could (fingers & toes crossed) eventually get rid of the rotten stench that poverty in old age, has for far too long, besmirched our country.