Pension reform 2012
People are living longer but are not saving enough to give them a sufficient income when they reach retirement. To address this shortfall in pensions, there are some big changes coming from 2012.
From 2012 there will be a new process called automatic enrolment. We as your payroll services provider can help with this but this is where your employer will automatically enrol you in to a pension scheme and will deduct pension contributions from your salary each week/month and will also make a contribution themselves. You need to be:
• At least 22 years of age
• Not yet reached state pension age
• Earning more than £7475 per year (or £5720
• Not already in a suitable pension scheme
The scheme will be introduced slowly and gradually over a couple of years, to allow your payroll services provider and businesses to put these changes in place. It will start with large employers from 2012, then medium sized businesses will join over the following couple of years, then small businesses will be introduced after that.
The amount of contributions will also be phased in. They will be increased over a couple years, for example, in the first year your employer could contribute 1% and you could contribute 0.8%. This will then increase over the following couple of years until it reaches full implementation, which is expected to be your employer contributing 3% and you contributing 4%.
The exact details of the legislation are still to be finalised, as part of your payroll services package we can advice you and as soon as we have more details we will update this post.