This article is from the source 'bbc' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.
You can find the current article at its original source at http://www.bbc.co.uk/news/business-42366471
The article has changed 8 times. There is an RSS feed of changes available.
Version 4 | Version 5 |
---|---|
Pensions: Automatic saving to start at 18 under new plans | Pensions: Automatic saving to start at 18 under new plans |
(35 minutes later) | |
Every worker aged 18 or over will begin saving into a workplace pension unless they opt out, under government plans to extend its automatic enrolment scheme. | Every worker aged 18 or over will begin saving into a workplace pension unless they opt out, under government plans to extend its automatic enrolment scheme. |
At present, the scheme means employers must enrol staff aged 22 and over and earning above £10,000 into a pension. | At present, the scheme means employers must enrol staff aged 22 and over and earning above £10,000 into a pension. |
Ministers hope to reduce the minimum age to 18 in the mid 2020s, and say it will affect about 900,000 young people. | Ministers hope to reduce the minimum age to 18 in the mid 2020s, and say it will affect about 900,000 young people. |
The system has been credited with ensuring more prepare for older age, but it means extra costs for employers. | The system has been credited with ensuring more prepare for older age, but it means extra costs for employers. |
It has been introduced gradually since October 2012. | It has been introduced gradually since October 2012. |
'Habit of saving' | 'Habit of saving' |
Work and Pensions Secretary David Gauke told the BBC's Andrew Marr Show there had been "greater saving for pensions" since automatic enrolment came into effect. | Work and Pensions Secretary David Gauke told the BBC's Andrew Marr Show there had been "greater saving for pensions" since automatic enrolment came into effect. |
"We want to extent that to young people under 22. | "We want to extent that to young people under 22. |
"I think we will get more people into the habit of saving." | "I think we will get more people into the habit of saving." |
He admitted increases in contributions from next year "might put people off", but added "the evidence is that opt-out rates have been lower than people predicted". | |
Ollie Browning, 21, welcomed the encouragement to save, adding that pensions had "not really crossed my mind yet". | Ollie Browning, 21, welcomed the encouragement to save, adding that pensions had "not really crossed my mind yet". |
He told the BBC: "I think especially in London, [I have] moved jobs quite frequently, tend not to stay in one place too long, so pensions have always sort of been lower down the list of things I've been conscious of." | He told the BBC: "I think especially in London, [I have] moved jobs quite frequently, tend not to stay in one place too long, so pensions have always sort of been lower down the list of things I've been conscious of." |
However, one industry figure was unimpressed by aspects of the Department of Work and Pensions' wider pensions review. | |
Ex-pensions minister Steve Webb, director of policy at pensions firm Royal London, said: "There are some great ideas in this review, including starting pension saving at age 18 and making sure that every pound that you earn is pensionable. | |
"But the proposed pace of change is shockingly lethargic. | |
"Talking about having reforms in place by the mid 2020s risks leaving a whole generation of workers behind." | |
What is automatic enrolment? | What is automatic enrolment? |
Unless they are already signed up to a workplace pension, a slice of a worker's pay packet is automatically diverted to a pension savings pot, which is invested until retirement. | Unless they are already signed up to a workplace pension, a slice of a worker's pay packet is automatically diverted to a pension savings pot, which is invested until retirement. |
Their employer also makes a contribution, as does the government. | Their employer also makes a contribution, as does the government. |
Individuals have the option to opt out if they wish to, although that will mean losing the employers' contribution. | Individuals have the option to opt out if they wish to, although that will mean losing the employers' contribution. |
Anyone on a short-term contract, working where an agency pays their wages, or who is on maternity, adoption or carer's leave should still be eligible. | Anyone on a short-term contract, working where an agency pays their wages, or who is on maternity, adoption or carer's leave should still be eligible. |
The total minimum contribution is currently set at 2% of earnings (0.8% from the worker, 1% from an employer, and 0.2% as tax relief from the government). | The total minimum contribution is currently set at 2% of earnings (0.8% from the worker, 1% from an employer, and 0.2% as tax relief from the government). |
From April 2018, it will increase to 5% of earnings (2.4% from the worker, 2% from the employer, and 0.6% as tax relief). | From April 2018, it will increase to 5% of earnings (2.4% from the worker, 2% from the employer, and 0.6% as tax relief). |
From April 2019 onwards, it will rise to 8% of earnings (4% from the individual, 3% from the employer, and 1% as tax relief). | From April 2019 onwards, it will rise to 8% of earnings (4% from the individual, 3% from the employer, and 1% as tax relief). |
The plan to lower the starting age follows a review of the system. | The plan to lower the starting age follows a review of the system. |
Those earning less than £10,000 can ask their employer to enrol them. | Those earning less than £10,000 can ask their employer to enrol them. |
Iona Bain, founder of the Young Money blog, said the move was still inadequate in solving a long-term pension crisis for the young. | Iona Bain, founder of the Young Money blog, said the move was still inadequate in solving a long-term pension crisis for the young. |
She said that school leavers, facing a "storm of financial pressures", should have the same National Living Wage as those aged 25 and over, if they were expected to contribute into a pension. | |
Get news from the BBC in your inbox, each weekday morning | Get news from the BBC in your inbox, each weekday morning |
The move will require legislation, as will the proposed other changes to the system including: | The move will require legislation, as will the proposed other changes to the system including: |
The proposals will cost employers an extra £1.4bn a year, and the government an extra £600m in tax relief a year. | The proposals will cost employers an extra £1.4bn a year, and the government an extra £600m in tax relief a year. |
"Requiring employers to contribute from the first pound of earnings, will mean that, by 2019, hundreds of thousands of small employers will have to pay up to £180 more per employee each year," said Mike Cherry, national chairman at the Federation of Small Businesses. | "Requiring employers to contribute from the first pound of earnings, will mean that, by 2019, hundreds of thousands of small employers will have to pay up to £180 more per employee each year," said Mike Cherry, national chairman at the Federation of Small Businesses. |
More than nine million people in the UK have been automatically enrolled into a pension so far, adding to the 10.8 million already contributing to a workplace pension. | More than nine million people in the UK have been automatically enrolled into a pension so far, adding to the 10.8 million already contributing to a workplace pension. |
However, the average proportion of earnings put into an investment-based defined contribution pension has fallen from about 9% of earnings before auto-enrolment, to 4% now. | |
The DWP's review, led by industry representatives, estimated that 12 million people are not saving enough for their retirement, representing 38% of the working age population. | The DWP's review, led by industry representatives, estimated that 12 million people are not saving enough for their retirement, representing 38% of the working age population. |
Are you a worker aged between 18 and 21? Would you be happy to be enrolled on a workplace pension? Please share your experience with us by emailing haveyoursay@bbc.co.uk. | Are you a worker aged between 18 and 21? Would you be happy to be enrolled on a workplace pension? Please share your experience with us by emailing haveyoursay@bbc.co.uk. |
Please include a contact number if you are willing to speak to a BBC journalist. You can also contact us in the following ways: | Please include a contact number if you are willing to speak to a BBC journalist. You can also contact us in the following ways: |
Or comment here: | Or comment here: |