NPSS update

dunstonh

http://news.bbc.co.uk/1/hi/programmes/moneybox/7163257.stm

key points:

• first year personal contributions to be 1% with 4% being phased in over a period to encourage joining.
• date it is due to start is likely to slip (if it says possible then that means it will)
• Employers will pay 3%, workers will pay 4% and 1% will come from tax relief.
• No higher rate tax relief (we knew that but it does no harm to keep reminding people).

Remember that this will be subject to change but this appears to be the current expectation.

For those that dont know what the NPSS/personal accounts are, they are a Govt scheme to opt all employees who do not have a scheme already (that matches a minimum of the NPSS benefits) into a national pension which gets employer contributions. Your commitment is 4% of your salary with the employer paying 3% and the Govt paying 1%.

Employer "free money" is the big gain here. Although higher rate taxpayers will be better off using personal pensions for contributions over 4% (so get the NPSS first and then use personal pensions for the rest). Expect a number of employers to introduce group personal pensions instead of the NPSS but matching the 3% contribution.

EdInvestor

dunstonh wrote: »

• No higher rate tax relief

Interesting.It is really very hard to justify giving such massive dollops of extra subsidy to the better off, especially the 18% (about to be 20%) not even locked in but claimed outside the pension via the tax return.

dunstonh

Not going to get into the morals of higher rate relief but it is a clear difference between personal pensions and the NPSS. Not exactly in the spirit of pension simplication.

I just get the whole feeling that the Govt would save an awful lot of money if they turned round and said that the rules are that all companies have to offer employer contributions of 3% which are matched by 4% by the employee (or better if the company wishes). Spending all this money in setting up a Govt scheme is a waste of taxpayers money when there is an existing framework that could be used at virtually zero cost to the taxpayer.

Paul_Herring

dunstonh wrote:

at virtually zero cost to the taxpayer.

Would it be cynical of me to suggest that if this happened, then the government would think it would not be seen to be doing something (useful/constructive?)