The National Pensions Saving Scheme comprises a new system of Personal Accounts which the Government is to introduce in 2012, as proposed last year in the Turner report.
Under the changes:
- All companies must offer auto-enrolment in the scheme for their employees, unless they offer auto-enrolment into their own occupational pension schemes and such schemes meet certain “minimum standards”.
- Companies will have to make compulsory contributions on “Band Earnings” i.e. (approx £5,000 – £33,000) of three per cent of salary to the NPSS, with employees paying four per cent and the Government one per cent via basic rate tax relief. The employer contributions will be phased in over three years, but the Government will consider a longer phasing-in period for smaller businesses.
- Self-employed individuals and also non-workers will be able to join the scheme on their own account.
According to Barclays Financial Planning, 31 per cent of UK small to medium size business employers believe that the National Pension Saving Scheme (NPSS) changes introduced this week will result in the levelling down of company pension schemes as companies seek to reduce their contributions in line with the Government’s changes.
The research shows that UK employers currently pay an average contribution of 4.2 per cent of salary to their employee pension scheme, compared to the mandatory contribution of three per cent required under the NPSS changes.
For more details on additional Pensions Simplification rules, and to get an online quotation and pensions advice for your small business – read our article here.
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