Ross Brooke Financial Services

Personal Accounts - Be Prepared
By Michael Roberts - 3rd April 2009

You could be forgiven for having missed the debate that has been going on within the Government for the past few years surrounding the new National Pensions Savings Scheme (NPSS), or Personal Accounts as they are also known.

However, this is a subject that will doubtless become a hot topic in the near future as the proposed legislation will affect every employer in Britain, and will change the face of pensions in the UK.

Whilst some of the finer points of the legislation are still being discussed, at Ross Brooke we thought it would be helpful to outline the details of the legislation as it currently stands.

• Every employer in the UK will be subject to the new legislation; from large multi-national organisation to the local chip shop.
• Employers will be required to make a contribution of 3% of "Band Earnings" (all income paid to employees, not just basic salary, between the band of £5,035 to £33,540 in 2006/07 terms).
• Employer contributions can be phased in: 1% in 2012, 2% in 2013 and 3% in 2014.
• Employees will need to contribute 4% of Band Earnings. A further 1% will be paid into the scheme in the form of tax relief, making 8% of Band Earnings in total.
• Employees will be automatically enrolled by the employer in April 2012. If an employee decides to subsequently opt out, they will be re-enrolled automatically every 3 years.
• Employers already contributing to a scheme may be exempt from paying into a Personal Account if their pension scheme is classified as a Qualifying Workplace Pension (QWP).
• The criteria for a QWP are yet to be confirmed but are likely to include a minimum 3% employer contribution, plus having processes in place to auto-enrol and deal with opt outs.

Although there are some issues yet to be resolved, it is time for employers to start thinking about the pension scheme they offer to employees, and if there is no scheme currently in place, how they will budget for the required contribution levels.

Employees may also see this as an ideal opportunity to review their pension arrangements and consider whether the plans they have in place at present will give them sufficient income when they retire.

If you would like assistance with this or any other issue, please get in touch. You will find our contact details on the Contact Us page.