Wednesday 17 October 2012

What Is Auto Enrolment?

In October 2010, the Pensions Minister substantiated that the government would go ahead with executing the modifications planned in the Pensions Act 2008, along with supplementary policies. The modifications commenced additional employer responsibilities to auto-enrol employees and make donations to a pension plan on their employee’s behalf.

The new amendments will apply to all employers regardless of the company size. In order to assist the demands for those employers who have no pension scheme, a refreshed national pension scheme, the National Employment Savings Trust known as NEST, has been incorporated.

Auto-enrolment means that workers will be automatically enrolled into their employer’s eligible pension plan whether they sign up for it or not. Currently, most workers fall short of accepting or applying for important pension benefits because they don’t volunteer to participate into their employer’s scheme. Auto-enrolment will eliminate this inconsistency.

Beginning October 2012, any qualifying workers will have to be auto-enrolled into a designated pension scheme. Employers will be able to select the particular scheme they prefer which may take into account the National Employment Saving Trust. All qualifying schemes must have minimum provisions in reverence of the benefits it supplies or the sum of contributions paid into it. In addition, the scheme must supply auto-enrolment for all qualifying workers and for any new employees when they become eligible.

Under these responsibilities, employers must: . enrol qualifying employees into an eligible workplace pension plan . select the eligible plan and either: contribute a minimum 3% towards a definite contribution plan or NEST; or . propose membership of a detailed benefit plan or particular complementary scheme that will have a contracting out assertion or upholds the test scheme standard

A qualifying employee is a worker within the age range of 22 and the state pension age. They must earn above the income taxed personal allowance which comes to over [£7,000.00] in 2011 and 2012. Contributions will be allocated to earnings between approximately [£5,000.00 and £33,500.00].

Additionally, employers will have a consistent responsibility to sustain eligible pension requirements for employees who:

  • are presently members of eligible plans; 
  • or those who become members of any plans

There will be a three month waiting period established for business owners to enrol employees into their particular plan. Within this time, workers can select to jump in and begin saving immediately. Employees will also be able to opt-out of their employer’s scheme if they choose not to join.

Larger employers who are expected to auto-enrol between October and November 2012 will be permitted to being auto-enrolment from as soon as July 2012 to evade the Christmas season. Employers will be allotted the option to re-instate employees three months either side of their involuntary re-enrolment time.




Pensions Explained (In Layman Terms)

A pension is a way to save for the future. It is a long-term investment that is shared by your employer as a job benefit. Money is deducted each pay period during your working years. Most employers contribute to this "pot" of money. The money is invested in various ways to build up a retirement fund. This is known as a pension plan.

It is important to have a pension plan. It is hard for younger people to conceive, but eventually everyone will be too old to work. Social security provides a partial income based on your earnings over the course of a lifetime. However, it is likely not going to be enough to afford to continue your current lifestyle. It is the responsibility of everyone to make sure they have invested in a pension plan either through their employer or through private investment. There are plans called 401K Plans that you can participate in.

The longer you work, the later you will take your pension plan benefits. The later you take these benefits, the higher your monthly payments will be. This is also true for Social Security benefits. Most people want to have enough in their golden years to make them truly golden. This means having money for extra things like trips and eating out in restaurants occasionally. With a good pension, this is possible. As a senior citizen, it is likely that you will be able to live on a bit less. For example, you won't need the expenses of transportation and clothing as you do during your working years.

With either a personal or company pension plan, you will be eligible for certain tax benefits that you would not otherwise qualify for. Since retirement saving benefits the Government, a personal pension plan is a way to get tax relief. Whatever the tax rate is at the time you are making payments to the pension plan, that same amount is entered into the funds. This is also true for those that do not even pay taxes. Tax payers who pay a high rate of tax can often get a higher refund at end of the tax year than they normally would have.

A pension investment plan is unlike bank savings. Funds are not to be touched until the day finally arrives when it is time to rest, as the word "retire" implies. Then, along with Social Security benefits, you can receive a "paycheck" every month for the rest of your life.