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Changes to Pensions

The Pensions Bill 2011 received Royal Assent on 3 November becoming the Pensions Act 2011. The most important aspects of the Act relate to the state pension age and automatic enrolment into workplace pension schemes.

The Act accelerates the timetables, set out in previous legislation, for increasing the state pension age to 66 and for equalising the state pension ages of men and women.

From April 2016 the state pension age for women will rise, equalising with the state pension age for men of 65 by November 2018. Between December 2018 and October 2020 state pension ages for both men and women will be increased from 65 to 66.

The Act also contains a number of measures which amend the automatic enrolment provisions for workplace pension schemes. Government is still working out all the practical guidance for employers and others about this, but this Act provides for example:

• an earnings trigger at which an employee must be automatically enrolled into a workplace pension (employees aged 22 years or older who have not reached pensionable age and who earn £7,475 or more will need to be enrolled unless they positively opt out), and new uprating provisions for the qualifying earnings band on which contributions are made;

• the introduction of an optional waiting period of up to 3 months before the duty to automatically enrol an employee commences;

• changes to provisions for automatic re-enrolment for staff who have already opted out

The duty of employers to automatically enrol their staff into a workplace pension scheme comes into force from 1 October 2012 for employers with a workforce of over 50,000. Smaller employers are phased in between 2013 and 2016. You can check the provisional start date for your business at  this link. Whilst that may seem a long time off employers should start thinking about updating their employment documentation so as to allow for employee and employer pension contributions.

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Starting from 2012 large employers will contribute 3% to employees’ pension schemes as standard. The scheme will be introduced in stepped stages to cover medium and small employers by 2016.  If the employer doesn’t operate a pension scheme they will be able to offer Nest, the government’s model. Employees will be automatically enrolled unless they opt out. The full contribution will be made up of tax relief, employer and employee’s contribution. More info at the National Employment Savings website.

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Final salary pensions dead in a decade | Mail Online. Private companies have been forced by shareholders and sheer economics to end these schemes. So much for retirement spent golfing with friends. Retirees are more likely to be looking for part time work as green keepers at this rate!

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