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Friday, 17 December 2010

Guest Blog

Gareth Rose of Gresham Wealth Management LLP

The coalition government is to press ahead with a Labour scheme to force all UK firms, regardless of size, to automatically enrol their staff into a pension scheme from 2012. Companies will have to pay in a minimum of 1% of every worker’s salary into a pension, rising to 3% by 2017. Workers will have to pay in a portion of their salary, phased in over five years, starting at 1% of pay and rising to 4% by 2017.

Every employer, large and small, will have to participate, although not the self-employed. It will mean that hundreds of thousands of small firms that currently do not offer or pay into a pension scheme will have to begin making payments. Employers have the option of establishing their own pension scheme that meets the rules or alternatively offering the new government-run pension scheme, called ‘Nest’ (National Employment Savings Trust), which proposes low costs and charges and is set to be administered by Tata.

All employees earning above £7,475 (the personal allowance for income tax from April 2011) will fall into the new rules, with a ‘waiting period’ of three months for new employees.

The main difference between the new and existing rules is the introduction of ‘auto-enrolment’. If an employee chooses to do nothing in regard to pensions, under the new rules, they will be members of the pension scheme and both they and their employer will be obliged to make contributions.

Employers who fail to make payments on behalf of their workers will face sanctions from the Pensions Regulator, which will have the power to fine non-compliant companies. Employees will still have the right to opt out of the pension arrangements, but officials believe that auto-enrollment will mean that many more will start saving than at present.

Gresham Wealth Management LLP are independent financial advisors and experts in the area of corporate pensions. As part of their services they offer a fixed fee corporate pensions review at a discounted rate of £400 for Chamber of Commerce members. For more information please contact them on 0161 927 722, email at info@greshamwm.co.uk or visit their website www.greshamwm.co.uk


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