MSE News: Pensions auto-enrolment delay 'a mistake'

Former_MSE_Guy

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

Read the full story:
Pensions auto-enrolment delay 'a mistake'

chattychappy

The "mistake" is putting any burden onto employers. Pensions are a benefit for people, and people should save for them.

There is a good argument to say that pensions should be compulsory, and that given employers handle most people's personal tax through PAYE it makes sense that they handle pension deductions too.

But this scheme just represents another "tax on jobs" at a time when we least need it. People must face up to the reality of providing for their old age - and this must rank above Sky, pizza takeaways, holidays, etc. It is all to easy to push this off onto employers. And of course once established, the rates will be put up... and up...

WestonDave

Company that specialises in providing company pension solutions and which expected to make a shedload of cash setting up these auto enrolled schemes thinks putting them off is a mistake - err and the news in that is what exactly!

What Mr McPhail's self interested comments utterly ignore is that even if you ignore the possibility that companies will struggle in the current climate to find their part of the contributions (3% extra on the wage bill) many people working in small businesses that have had 3 years of static pay aren't going to welcome finding 4% disappear into a pension.

The_Pixi

Well this is disappointing. I have worked for large retailers in the past and I'm glad that now people will have company contributions added to what they can put away. But I work for a small company with less that 50 employees.

I recently started putting in £100 a month to a sipp and the government add £25 tax relief ( would this still happen along the with 1% mentioned in the story for auto enrolment pensions) but I always found it a shame that my employer doesn't add anything to this.

If my employer had to add 3% it would come to about £900 + the 1% from the government would almost double what I put away (if the current £20 tax relief is applied that's another £300 added to my contributions)

As it is I already save £350 a month to create a deposit for a mortgage in the future (mostly because i see that as the greatest assest for retirement, i dont want the worry of paying rent, from what will be a small pension pot) and a small amount for my nephew so he has a kick start.

The amount of money the company I work for waste on flight to & from America every year is certainly keeping Virgin Air afloat

gadgetmind

chattychappy wrote: »

The "mistake" is putting any burden onto employers.

Pensions are a very cost effective way for an employer to reward employees, and company contributions avoid the 13.8% + 2% NI charge, so it's better for the company to contribute than to pay the employee so they can contribute more.

Win win.

BobQ

WestonDave wrote: »

Company that specialises in providing company pension solutions and which expected to make a shedload of cash setting up these auto enrolled schemes thinks putting them off is a mistake - err and the news in that is what exactly! .

My thoughts exactly.

WestonDave wrote: »

What Mr McPhail's self interested comments utterly ignore is that even if you ignore the possibility that companies will struggle in the current climate to find their part of the contributions (3% extra on the wage bill) many people working in small businesses that have had 3 years of static pay aren't going to welcome finding 4% disappear into a pension.

All of this is undoubtedly true, but the Government has to decide whether its acceptable for people to take the view that they will not contribute to a pension and just rely on the taxpayer to fund benefits in their increasingly long retirement. Its patently obvious that many people simply do not bother to make provision. I have a lot of sympathy for those on low incomes but there are many people on average incomes who prefer to to spend money rather than provide a pension.

While I can see an argument that retirement provision should not fall on empolyers, provided its done by regulation then it does create a relatively level playing field in the labour market. A pension should be viewed as part of an employers reward package for their staff, and some form of employers contribution is a reasonable incentive for an employee to make the effort to contribute.

I would prefer it was introduced sooner for everyone, even if small businesses need some tax incentives to make it economic. We need to take a long term view of this and employers and employees must play their part.

donny_jim

while in principal i agree that we should all save for our retirement, i don't think the present system is fair.
why should a higher rate tax payer get relief at the higher rate, its not as if he pays the higher rate on all his(her) earnings.
why not just have 1 rate for all say 30%.
also in this proposal it says the govnt contributes 1% is this on top of the current tax relief already given.

jem16

donny_jim wrote: »

why should a higher rate tax payer get relief at the higher rate, its not as if he pays the higher rate on all his(her) earnings.

The higher rate taxpayer only gets higher rate tax relief on the same amount he/she pays higher rate tax on. So if you contributed £3000 towards your pension but only paid higher rate tax on £1000 of your income, you would only get higher rate tax relief on that £1000 and not the whole £3000.

also in this proposal it says the govnt contributes 1% is this on top of the current tax relief already given.

That's just the normal tax relief based on basic rate. A 5% contribution attracts 1% tax relief meaning you actually pay 4%.

The_Pixi

jem16 wrote: »

That's just the normal tax relief based on basic rate. A 5% contribution attracts 1% tax relief meaning you actually pay 4%.

I thought the 1% was of your salary not the contribution and was added to the 4%you pay and 3% the employer pays totalling 8% of your salary.

I'm interested to know if you will still get the 20% relief on the contribution you make to the pension

1% of my salary is much less than 20% of a contribution

jem16

The_Pixi wrote: »

I thought the 1% was of your salary not the contribution and was added to the 4%you pay and 3% the employer pays totalling 8% of your salary.

Let's think of it in actual figures.

£20,000 salary.

You pay 4% which is £800.
Government pays 1% which is £200.
Total is £1000.

As I said a 5% contribution attracts tax relief of 20%.

5% contribution is £1000. Tax relief of 20% on that contribution is £200 which means that you actually pay £800 and the tax relief is £200.

Which is the same as 4% contribution from you and 1% from the government.

I'm interested to know if you will still get the 20% relief on the contribution you make to the pension

Yes you do.

1% of my salary is much less than 20% of a contribution

No it isn't. Work it out yorself with real figures.

The_Pixi

1% of £28.000 = £280.00 added by government

I currently put £100 a month aside getting £25 on top, total added to pension £100 x 12 = 1200 + £25 x12 (£300) = £1500

So £20 more added by the government

The proposal is that the contributions should be a % of salary not actual contribution, 1% by the government + 4% by me and 3% by the employer totalling 8% of the salary total.

I wanted to know if I still also get 20% relief on my part if I put more than 4% in, which I am doing now, or if the new scheme was capping the government contribution to just 1% of my slalary.