Pensions White Paper

It is not long ago that stakeholder pensions were introduced. Then we had A-Day and now further changes to pensions are being considered. A White Paper was released on 25 May and contains many proposals which would change the pensions system quite radically.

Amongst the main proposals are the following:

• a low cost savings scheme, through personal accounts, in which employees would be automatically enrolled unless they were members of their employer's scheme which met a minimum standard
• employers would be required to make contributions while the employee is in the scheme
• employees would contribute 4% of earnings between approximately £5,000 and £33,000. Employers would pay 3% on the same band of earnings and a further 1% would be added from the employees’ basic rate tax relief (some employees would receive higher rate tax relief too)
• there would be measures to help smooth the introduction of compulsory employer contributions
• non-employees and the self employed would be able to opt into the personal accounts scheme
• the basic state pension would be re-linked to earnings from 2012 but only if it could be afforded at that time
• the state second pension would become a simple, flat rate top-up to the basic pension
• there would be a gradual rise in the state pension age, rising to 66 between 2024 and 2026, from 66 to 67 between 2034 and 2036 and then to 68 in 2044 to 2046.

These are only proposals, of course, and we will keep you informed of future developments.