U.K. government to announce liberal pension scheme |
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Published
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Tue, 12 Dec 2006 10:05
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LONDON: The U.K. government is expected to announce plans for a pensions scheme that will motivate millions of workers to save for their retired life. Work and pensions secretary John Hutton is releasing a white paper Tuesday outlining the new concept of "personal accounts" that are to take effect from 2012.
Under the plan, employers will be required to automatically enroll all their employees into either an existing workplace pension or the "personal accounts". The employees will have to contribute 4 per cent of their earnings, while employers will match it with a 3 per cent of concerned employees' salaries. In addition, there will be tax relief of 1 per cent from the government. Good pension schemes will be awarded a quality mark for encouraging employees not to abandon the personal accounts scheme.
The government expects that nearly 10 million workers will benefit from the plan and hopes that it will bridge the gap in the nation's retirement savings and supplement the continuing state pension and private pension systems.
The proposals are part of the recommendations by Lord Turner's Pensions Commission which published its findings in 2005.
There is some apprehension among trade union circles that some employers may put pressure on staff to opt out of the scheme in order to avoid paying their contributions.
There are also fears that companies with more generous schemes would opt for personal accounts thereby depriving the employees of existing benefits. The National Association of Pension Funds has urged the government to ensure personal accounts complemented rather than replaced existing schemes.
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