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Categories:Pensions

PBR: Full personal accounts contributions delayed until 2017

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The Government has given employers the green light to contribute only 1 per cent to their employees’ pensions for an extra year, resulting in members not recieving the full 3 per cent contribution until October 2017 while Treasury coffers are boosted by £2.4bn.

Auto-enrolment with a 1 per cent employer contribution will still begin in October 2012 but previously firms had to increase the amount they were paying into employees’ pensions to 2 per cent in October 2015 and then to the full 3 per cent contribution by October 2016.

In today’s pre-Budget report, Chancellor Alistair Darling has delayed this increase so that employers are not required to boost their contribution to 2 per cent until October 2016 and then reach the full 3 per cent by 2017.

The Government says the move is designed to help businesses suffering from the recession.

But the Association of British Insurers has lambasted the plans.

Acting director-general Maggie Craig says: “When the Government first announced the delay of personal accounts it claimed it wanted to avoid “another Terminal 5” despite the damage to savings by the low-paid and the uneven playing field it created for private providers. Today, it admits this delay will save £2.4bn. 

“This money will be saved at the expense getting the low-paid into long term pension saving which is absolutely vital for the future welfare in retirement of the workers of today.

“The Government’s changes to the timetable will mean that employers joining the scheme in 2012 will be able to pay just 1 per cent contribution for a full four years with Government backing. 

“This will create a dangerous incentive for employers to join the Governments scheme and level down from the typical private sector defined contribution scheme of over 6 per cent. This will lead to a fall in overall savings levels for the employees affected.”

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Readers' comments (3)

  • This government is dead, lifeless, stiff. Even Monty Python's famous Norwegian Blue has more puff in it.

    Anyone with any shred of honesty knows that we cannot predict what the state of the world economy will be in 2010, never mind 2016/17. This is merely a sop to the employers to 'make up' (as if) for the rise in NI contributions.

    George Osborne got it spot on today when he accused the government of ring-fencing black holes. There must be another quango in that!

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  • We pay our staff a certain figure, then ask how they want to take it.

    Some take it all, others sacrifice whatever amount and have that amount paid into a SIPP, funded by our company, thus avoiding a certain amount of NI for both employer and employee.

    In a particular year a staff member may decide to have all salary, e.g. on moving house. Our staff know that their share of the pot is only so big and they are encouraged to take responsibility for their own financial well-being. This has had a very beneficial affect on motivation and how they see their work.

    Forcing us to pay a %age into yet another rehash of the pensions laws by yet another Government will mean we reduce staff rises by 1% when personal accounts first come in. I wonder what that will do to morale? 1% isn't much, but it's the idea of someone else telling them what to do - nanny state in other words.

    The more I see of this idea of personal accounts, the less I like about it.

    Since the 1960s (and possibly earlier) political posturing with the nation's pensions has caused a mess and resulted in too few people making even half adequate plans for financial security in old age. For what was (until recently) the 4th richest nation on Earth, this state of affairs is appalling!

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  • Let's demand to see the pensions entitlement of all those employed by the pensions regulator!
    My guess is that it would make the MP's expenses scandal look like very small beer.
    Why does the private sector accept this unfair structure in which it pays for excessive pensions for all the mandarins whilst the pensions regulator et al dictate to the rest of us whilst treating us like serfs.

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