This will be introduced in 2012 and will involve major changes to both state and private pensions.

The overall aim of the govenment's pension reform strategy is to get more people saving for retirement particularly through a workplace pension.

The government says... it will mean that millions of workers will start saving in a company pension scheme for the first time. (Taken from Financial Times article, 29th December 2011).

According to the Department for Work and Pension (DWP) 59% of the private sector employees are not in a work place pension.

In 2012, the link between state pensions and earnings will be re-established.  In 2016, the earliest age for a male to receive state pension will be 66 years.  In 2020, the women's state pension age will reach 66 years in line with men.

The current basic state pension for a single person or married partners who both qualify is £102.15 per week each. For anyone who doesn't qualify for a basic state pension themself, but has a husband, wife or civil partner who does, £61.20 can be claimed using the partner's NI contributions record.

Jobholders
All jobholders between the ages of 22 and 65 years earning over £7475 p.a. will be automatically enrolled in a "qualifying" scheme although they do have the option to opt out if they wish.

N.B. - If a jobholder opts out they will miss out on the opportunity to receive a minimum of 3% contribution from their employers.

Employers
New employer responsibilities will start from October 2012.

• Employers will be required to pay at least 3% of qualifying earnings into a qualifying pension scheme.
• Employers without an existing pension scheme will have to set one up or use the government scheme known as the National Employment Savings Trust (NEST).

Benefits
There are already great benefits to contributing to a pension scheme including -

• 20% tax relief for a basic rate tax payer and 40% for higher rate tax payers.
• A key tool for employers to retain and motivate employees or for  recruiting new ones.
• Salary sacrifice can be used to reduce the cost for pension planning for the employer and the employee.


Get ahead of the game...
Call us at ca financial services on 0845 371 0262 or 01732 617950  for more information and let us help you prepare for pension reform. 

Click here for more information about Workplace Pension Reform.

Click here to find out when the new law will apply to you.