Pensions Minister: Get ready for the 2012 revolution

Former_MSE_Guy

This is the discussion thread for the following MSE News Story:

"All employees will be gradually enrolled into a pension from next year. Pensions Minister Steve Webb explains the impact ..."

Read the full story:
Pensions Minister: Get ready for the 2012 revolution

danothy

I am very much liking the fact that there will be a minimum employer contribution, even if it is a small one, makes it a much more appealing prospect in my eyes.

I do find myself wondering if this will cause problems for small businesses though ...

Andrew_Williams

Here in Australia it is mandatory for the employer to pay 9% of salary into a Pension (Superannuation) Fund for their employees.

This is rising to 12%, also at retirement a person can continue to leave their retirement fund invested until they die (I know that there have been changes around this lately in UK). Anyone in Australia can have flexible access to their monies from retirment and take unlimited amounts of income or continued account growth (minimum required).

The State (Age) Pension is means tested and Wraps (SIPPS) have been used commonly for years.

The UK have been slow off the mark on this and still have some catching up to do?

Dominic9

The article doesn't mention that the minimum contributions are based only on banded earnings. Only earnings above £5,035 (and that is in 2006/07 earnings terms, so it will be higher now) count.

The median income of those not saving for a pension is £19,000 (source Making Auto-Matic Enrolment Work)

So for the typical (median) person benefitting from this, the mandatory employer contribution per month will be less than:

£12 in 2012/13
£12 in 2013/14
£12 in 2014/15
£12 in 2015/16
£18 in 2016/17
£30 in 2017/18
£35 in 2018/19 onwards

So at the end of the first 7 years, the employer would have put in about £1,500 in total. This would buy an annuity at age 65 that paid about £80 a year.

Add in individual contributions, tax relief and investment growth and perhaps you'll get up to £20 or even £30 a month in retirement from those 7 years of saving.

So there will be a need to do a lot of individual saving for retirement on top of the minimum.

chattychappy

Yet another imposition on employers. It's bad enough that they have to administer the scheme, let alone put money into it.

If it's necessary to make people save for their old age, fine. But this should come out of wages only.

It might seem innocuous now, but as time goes on it will be all to easy for governments to increase the levy on companies.

Not fatal for employers, but with all of the other stuff that is put upon them, it's another nail in the coffin for UK plc.

jamesd

Nest isn't a low cost pension option and traps money in it by banning transferring out to places that offer better deals. It's better than nothing but anyone whose employer is considering using it should ask them to pick something more competitive instead.

nicknameless

chattychappy wrote: »

Yet another imposition on employers. It's bad enough that they have to administer the scheme, let alone put money into it.

If it's necessary to make people save for their old age, fine. But this should come out of wages only.

It might seem innocuous now, but as time goes on it will be all to easy for governments to increase the levy on companies.

Not fatal for employers, but with all of the other stuff that is put upon them, it's another nail in the coffin for UK plc.

I know - why should an employer have any obligations whatsoever to its employees. Ridiculous eh. I think we should seriously consider conscripted labour (better not call it slavery as that won't help the cause in these modern PC times) to help UK PLC out of the mire it's in, rather than actually paying wages. Whatever next - we'll be asking them to pay taxes soon. Incredible.

Andy_L

chattychappy wrote: »

Yet another imposition on employers. It's bad enough that they have to administer the scheme, let alone put money into it.

If it's necessary to make people save for their old age, fine. But this should come out of wages only.

AIUI, and I'm sure Andrew Williams can correct me, that Australian employers planned for it and instead of paying payrises paid the, gradually ratchetting up, employers contributions instead

When combined with employees contributions, Australians are now making a decent pension contribution rather than relying on future taxpayers

no_choice_now

This is nothing short of legalised theft! It's bad enough the government can take over 75% of some peoples incomes in certain circumstances.

It's a well known fact that you would be better off not having a pension but saving your own money privately, and ideally where the government can't touch it!

What is the point giving your money to somebody else so that when THEY decide you can retire, they will give you a little bit back every now and again until you die!?

If you put it in your own savings account you can retire when YOU want to, and you get the FULL amount BEFORE you die,, and anything you don't use can then go to your chosen ones.

You're mental in the head if you think saving in a pension is a good idea.

Lokolo

no_choice_now wrote: »

It's a well known fact that you would be better off not having a pension but saving your own money privately, and ideally where the government can't touch it!

What is the point giving your money to somebody else so that when THEY decide you can retire, they will give you a little bit back every now and again until you die!?

If you put it in your own savings account you can retire when YOU want to, and you get the FULL amount BEFORE you die,, and anything you don't use can then go to your chosen ones.

This does really show your lack of understanding of pensions.

You can take your pension from 55, the age at which hasn't changed (to my knowledge). The only age that has changed that has to do with pensions is the state pension - which this has nothing to do with. You are also not giving the government the money, you are giving it to pension providers, who do not decide when you can have it and what age.

If you put money in a savings account you run the risk of inflation shortfall over a long period. Anyone with a basic understanding of economics will know this.

By all means S&S ISAs are a realistic alternative to pensions but they do not come with benefits such as company contributions and tax relief.

Aegis

no_choice_now wrote: »

This is nothing short of legalised theft! It's bad enough the government can take over 75% of some peoples incomes in certain circumstances.

It's a well known fact that you would be better off not having a pension but saving your own money privately, and ideally where the government can't touch it!

No, it isn't. A pension is a tax wrapper for your own savings and investments, held in trust until you reach the age at which you need them. The gains aren't subject to capital gains tax, the income isn't subject to income tax (other than the 10% tax credit on dividends). You get tax relief on the way in, 25% back out tax free as a lump sum followed by income which is usually accompanied by a higher personal allowance if you retire late.

If you have enough secured income, you can draw as much out as you like. If you don't, you still have the choice between buying an annuity and opting to draw out up to the GAD rate each year.

What is the point giving your money to somebody else so that when THEY decide you can retire, they will give you a little bit back every now and again until you die!?

See above. It seems you missed both the point and the specifications for pension wrappers.

If you put it in your own savings account you can retire when YOU want to, and you get the FULL amount BEFORE you die,, and anything you don't use can then go to your chosen ones.

You'll also have to put aside a staggeringly large amount each year, as a savings account will inevitably grow at less than inflation each year once you take account of tax. Using a saving account to plan for your retirement is one of the worst ideas ever.

You're mental in the head if you think saving in a pension is a good idea.

Interesting claim, but utterly false.