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

jem16

The_Pixi wrote: »

1% of £28.000 = £280.00 added by government

Yes it is.

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

You are currently putting aside 5.36% of your gross salary.

So £20 more added by the government

Of course it is as 5.36% is more than 5%. Tax relief on that extra 0.36% is 0.072%. 0.072% of £28,000 is approximately £20.

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.

Contributions and tax relief are always worked out on gross figures.

£28,000 at 5% is £1400. Tax relief on that is £280 meaning you contribute £1120.

£28,000 at 4% is £1120. £28,000 at 1% is £280 so total again is £1400 into the pension.

Perhaps read this which explains it.

http://www.nestpensions.org.uk/schemeweb/NestWeb/public/NESTforSavers/contents/contribute-to-nest.html

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.

Limit is apparently £4,400 in one tax year. This is the gross payment.

Again explained here.

http://www.nestpensions.org.uk/schemeweb/NestWeb/public/NESTforSavers/contents/contributing-more.html

To be honest if you want to contribute more you would be better doing it outside of NEST.

The_Pixi

jem16 wrote: »

Yes it is.



You are currently putting aside 5.36% of your gross salary.



Of course it is as 5.36% is more than 5%. Tax relief on that extra 0.36% is 0.072%. 0.072% of £28,000 is approximately £20.



Contributions and tax relief are always worked out on gross figures.

£28,000 at 5% is £1400. Tax relief on that is £280 meaning you contribute £1120.

£28,000 at 4% is £1120. £28,000 at 1% is £280 so total again is £1400 into the pension.

Perhaps read this which explains it.

http://www.nestpensions.org.uk/schemeweb/NestWeb/public/NESTforSavers/contents/contribute-to-nest.html




Limit is apparently £4,400 in one tax year. This is the gross payment.

Again explained here.

http://www.nestpensions.org.uk/schemeweb/NestWeb/public/NESTforSavers/contents/contributing-more.html

To be honest if you want to contribute more you would be better doing it outside of NEST.

Hi, thanks for the link as that explained what I wanted to know.

Seronera

Until there is more in it for the saver than there is for the provider then attempts to get people to contribute to money purchase schemes are doomed. If/when compulsion comes in you will just get a plethora of minimum contributions from people.

Now, wasn't it Mr Hargreaves who made a submission to the select committee on pensions desperately trying not to have to reveal how much he is paid in over ride by the fund companies he supports with his pension schemes. Having started his company in 1981 he is now in the 100 richest people in the UK...and he is not one of the villains. So we know who makes the money in his schemes, and its not the saver.

Anything that is compulsory should have either a nil aquisition cost or as near nil as is possible. And the puirchase of annuities should be entirely optional regardless of fund size and only one of a range of choices. On death there should be a residual fund value that can be gifted into the pension schemes of other family or the next generation. This is the only way that fund values are ever likely to accumulate to figures that provide a decent pension.

Insurance companies must be sitting on surpluses of billions from annuity purchase.

Seronera

gadgetmind

Seronera wrote: »

Insurance companies must be sitting on surpluses of billions from annuity purchase.

They make their money by being able to invest in assets that generate more income from the money than they have to pay out on the annuity. They are need to reduce risk, and it's hard to generate any meaningful income from low-risk assets nowadays!

Linton

Seronera wrote: »

.... On death there should be a residual fund value that can be gifted into the pension schemes of other family or the next generation. This is the only way that fund values are ever likely to accumulate to figures that provide a decent pension.

I

But the whole point of an annuity is that it is an insurance - an insurance against living too long. So those who die early subsidise those who dont.

If everyone was able to pass on the residual amount on their death the insurance aspect would disappear and you would have to save assuming that you were going to live to say 100 just on the off-chance you may. Or of course accept that if you lived too long, at the most vulnerable part of your life you would become dependent on the state, living in the cheapest accommodation available paid for by the taxes of those yet to die. At least with an annuity you would be living at the expense of those who have already died and so presumably wont miss the loss.

unlucky67

A lot of that has gone over my head (!) But I think it is right to delay ....or even have a serious rethink for small businesses...
I do the payroll/accounts for a small employer (a playgroup and registered charity) -we have 5 part-time employees (I'm one!).
The overall management is by a committee of (busy) parent volunteers which changes on a yearly basis -mostly they don't have any business/accounting experience. We have one person who earns more than £7500 (just) and 2 that are borderline whether they could request to join and the employer has to pay their contribution..(c£5k pa).They all work term time and variable hours - and for 2 months (summer) they only get holiday pay...everyone bar one is paid just above mimimum wage...
We are really struggling financially - long term survival isn't looking good...staff have had pay freeze and hour reductions...
We really can't afford to pay any extra out ...but also someone has to organise this...
Probably me ....I do more hours then I'm paid for now and get just above minimum wage...I can only spend a limited amount of time and no money on this...
This is the same problem as stakeholder pensions - it will be the mimimum we can get away with legally, that costs us the least - probably NEST - which our current designated stakeholder pension provider (yes we do have one - noone joined but we fulfilled our legal obligation) says will be the worst deal for the employees...
(This was similar when my partner had a restaurant - most staff low paid/part time - no interest in joining a pension - and me having to decide which stakeholder to go for ....all not in the interest of low paid employess....)

gadgetmind

Linton wrote: »

If everyone was able to pass on the residual amount on their death the insurance aspect would disappear and you would have to save assuming that you were going to live to say 100 just on the off-chance you may.

We don't need to modify annuities such that they allow some/all capital to be passed onto dependants as we have the drawdown option for that, or at least we do until HMG change the rules again.

100% has crippled drawdown and 75% or even 50% would kill it instantly. There is no good reason why this should be done, but there wasn't really a good reason for HMG to drop it to 100% IMO.

tartanterra

MSE_Guy wrote: »

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

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

Whilst this will undoubtedly be a burden on business, that's an argument that can always be trundled out.

Times change, what people expect in retirement has changed, as has life expectancy.

Whatever the arguments against NEST, it is always better to do something rather than nothing. It's a fact that not enough future provision is being made for retirement and whilst NEST may not be the total solution, it is a start, and that's why it should be implemented without further delay.

The status quo is no longer viable. This has been a poor decision by the government.

Linton

gadgetmind wrote: »

We don't need to modify annuities such that they allow some/all capital to be passed onto dependants as we have the drawdown option for that, or at least we do until HMG change the rules again.

100% has crippled drawdown and 75% or even 50% would kill it instantly. There is no good reason why this should be done, but there wasn't really a good reason for HMG to drop it to 100% IMO.

Exactly - those who wish to take part in a collective sharing of the financial risk of excessive old age can go for an annuity, those who dont can use drawdown.

CLAPTON

tartanterra wrote: »

Whilst this will undoubtedly be a burden on business, that's an argument that can always be trundled out.

Times change, what people expect in retirement has changed, as has life expectancy.

Whatever the arguments against NEST, it is always better to do something rather than nothing. It's a fact that not enough future provision is being made for retirement and whilst NEST may not be the total solution, it is a start, and that's why it should be implemented without further delay.

The status quo is no longer viable. This has been a poor decision by the government.

alternatively we could simply increase the state pension scheme and scrap NEST with all the associated costs