TV money expert Jasmine Birtles talks about the revolutionary changes
Fancy free money from the government and your bosses?
That’s what is on offer next month as we are all encouraged to make sure we have a decent company pension.
Those TV adverts with Nick Hewer from The Apprentice and Theo Paphitis from Dragons Den are putting out the same message.
So if you work for a big company, from October 1 you may find you have less in your pay packet but a little more to put away for your future.
That’s because the largest UK firms will have to put all of their employees into a company pension if they are not already in one.
So whether you are a builder or a supermarket cashier, if your firm employs more than 120,000 people they will have to put you into their scheme.
It’s called “auto-enrolment” and over the next five years the scheme will be extended to cover everyone. Pensions minister Steve Webb says: “If we can get 7.5million people into an employer contributory scheme that will be incredible.”
The next phase comes at the the end of 2013 when firms with 50,000-119,999 employees are included. And everybody else has to be offered a pension by April 2015.
SO WHAT IS AUTO-ENROLMENT?
IF you are 22 or over, and you earn more than £8,105 a year, you will be automatically enrolled in your company’s pension scheme.
About 3% of your salary will go into the pension every year (rising to at least 4% by 2018).
Your employer will have to add cash to your fund too (1% of your gross salary to start with, then up to 3% by 2018) and the government will add the tax you would have paid.
You can opt-out if you want but I wouldn’t if I were you.
Unless you are close to retirement and would be better off living on benefits, pretty much everyone is better off with a company pension.
WHY SHOULD I JOIN MY FIRM’S PENSION SCHEME?
TWO reasons that I see: 1) You will develop a retirement fund without putting in any effort yourself.2) You basically get free money from your employer and the government.
Of course, company pensions are not foolproof. If the pensions company your employer works with invests badly, you could still lose money. But most people are much better off when they retire if they have been putting money into a pension.
I’M AN EMPLOYEE... HOW MUCH DO I HAVE TO PAY?
TO start off with you must pay 3% of your gross salary (the money you get before the tax and National Insurance is taken out). By October 2018 that will go up to reach 5% of your salary.
HOW DO I OPT OUT?
JUST tell your employer that you don’t want to be in the company scheme and they won’t put you in it.
They will probably be relieved because it will mean they don’t have to pay into it either.
Your employer will also have a duty to automatically enrol you into the scheme every three years, so if you really don’t want to join, make sure you keep an eye on this.
If you opt out, do it for the right reasons. If you’re already putting money into a pension or other investments and you don’t think much of the company pension, fair enough.
But if it’s just because you want to spend the money now, then stop yourself. You need to put money away for your future because the state is less and less able to look after you.
I’M AN EMPLOYER... HOW MUCH DO I HAVE TO PAY?
INITIALLY, 1% of your employee’s gross salary, rising to 3% by 2018.
If you have a small business you won’t have to do anything until April 2015. But after that, even if you just employ a nanny or a gardener or a carer, you will have to provide some sort of pension for them.
It must be one approved by the government for auto-enrolment. You can find out more about this online at thepensionsregulator.gov.uk
WHY HAVE THEY STARTED AUTO-ENROLMENT?
BASICALLY, it’s because we’re all living a lot longer than we used to, and the State can’t fund all of our retirements any more.
Meanwhile, the number of people saving in workplace pension schemes has dropped to its lowest level since records began almost 60 years ago, with just 2.9million workers currently enrolled, according to the Office For National Statistics.
You are likely to live for at least 20 years after you retire and you’ll need money to keep yourself going... and to have a fun time!
Australia, New Zealand and some European countries switched to auto-enrolment about 10 years ago and it means that millions of their workers are already building up nice retirement pots for themselves. That’s what our government wants us to do, too.
Most of us don’t put anything like enough away to look after ourselves when we retire but if we let our employers do it we’re more likely to keep saving regularly.
Auto-enrolment should be particularly helpful for women because they tend to save less than men for their retirements, even though they generally live longer.
Mothers are particularly bad at investing for themselves because they will usually spend money on their families before they look after themselves.
Culled from the Mirror
That’s what is on offer next month as we are all encouraged to make sure we have a decent company pension.
Those TV adverts with Nick Hewer from The Apprentice and Theo Paphitis from Dragons Den are putting out the same message.
So if you work for a big company, from October 1 you may find you have less in your pay packet but a little more to put away for your future.
That’s because the largest UK firms will have to put all of their employees into a company pension if they are not already in one.
So whether you are a builder or a supermarket cashier, if your firm employs more than 120,000 people they will have to put you into their scheme.
It’s called “auto-enrolment” and over the next five years the scheme will be extended to cover everyone. Pensions minister Steve Webb says: “If we can get 7.5million people into an employer contributory scheme that will be incredible.”
The next phase comes at the the end of 2013 when firms with 50,000-119,999 employees are included. And everybody else has to be offered a pension by April 2015.
SO WHAT IS AUTO-ENROLMENT?
IF you are 22 or over, and you earn more than £8,105 a year, you will be automatically enrolled in your company’s pension scheme.
About 3% of your salary will go into the pension every year (rising to at least 4% by 2018).
Your employer will have to add cash to your fund too (1% of your gross salary to start with, then up to 3% by 2018) and the government will add the tax you would have paid.
You can opt-out if you want but I wouldn’t if I were you.
Unless you are close to retirement and would be better off living on benefits, pretty much everyone is better off with a company pension.
WHY SHOULD I JOIN MY FIRM’S PENSION SCHEME?
TWO reasons that I see: 1) You will develop a retirement fund without putting in any effort yourself.2) You basically get free money from your employer and the government.
Of course, company pensions are not foolproof. If the pensions company your employer works with invests badly, you could still lose money. But most people are much better off when they retire if they have been putting money into a pension.
I’M AN EMPLOYEE... HOW MUCH DO I HAVE TO PAY?
TO start off with you must pay 3% of your gross salary (the money you get before the tax and National Insurance is taken out). By October 2018 that will go up to reach 5% of your salary.
HOW DO I OPT OUT?
JUST tell your employer that you don’t want to be in the company scheme and they won’t put you in it.
They will probably be relieved because it will mean they don’t have to pay into it either.
Your employer will also have a duty to automatically enrol you into the scheme every three years, so if you really don’t want to join, make sure you keep an eye on this.
If you opt out, do it for the right reasons. If you’re already putting money into a pension or other investments and you don’t think much of the company pension, fair enough.
But if it’s just because you want to spend the money now, then stop yourself. You need to put money away for your future because the state is less and less able to look after you.
I’M AN EMPLOYER... HOW MUCH DO I HAVE TO PAY?
INITIALLY, 1% of your employee’s gross salary, rising to 3% by 2018.
If you have a small business you won’t have to do anything until April 2015. But after that, even if you just employ a nanny or a gardener or a carer, you will have to provide some sort of pension for them.
It must be one approved by the government for auto-enrolment. You can find out more about this online at thepensionsregulator.gov.uk
WHY HAVE THEY STARTED AUTO-ENROLMENT?
BASICALLY, it’s because we’re all living a lot longer than we used to, and the State can’t fund all of our retirements any more.
Meanwhile, the number of people saving in workplace pension schemes has dropped to its lowest level since records began almost 60 years ago, with just 2.9million workers currently enrolled, according to the Office For National Statistics.
You are likely to live for at least 20 years after you retire and you’ll need money to keep yourself going... and to have a fun time!
Australia, New Zealand and some European countries switched to auto-enrolment about 10 years ago and it means that millions of their workers are already building up nice retirement pots for themselves. That’s what our government wants us to do, too.
Most of us don’t put anything like enough away to look after ourselves when we retire but if we let our employers do it we’re more likely to keep saving regularly.
Auto-enrolment should be particularly helpful for women because they tend to save less than men for their retirements, even though they generally live longer.
Mothers are particularly bad at investing for themselves because they will usually spend money on their families before they look after themselves.
Culled from the Mirror
No comments:
Post a Comment