Why is the government introducing personal accounts?
As part of its pensions reform package, the government believes that a new low cost pensions saving scheme is essential to help low to middle income workers save more for their retirement.
The system is targeted at workers who do not have the opportunity to join other good workplace schemes. It is designed to overcome the culture of undersaving and seeks to deal with the decision paralysis felt by many. It should help those that know they should be saving but simply don’t know which product to pick.
EEF has been very involved in the formulation of the government proposals and supports its main principles. We continue to work closely with BERR and DWP officials to do what we can to ensure that unnecessary burdens on employers are minimised and the new system is straightforward for our members to operate.
When will the new pensions regime be implemented?
The new regime will be implemented in 2012. The government’s target date is 1 April 2012, although this may change by a month or two.
The government has not yet decided whether to implement the new system at exactly the same time for all businesses. If implementation is phased in with certain employers going first, this is expected to be over a relatively short period of time.
We do, however, expect contribution rates to be phased in over three years (see How much will you and the worker have to contribute?).
What stage are the proposals for the new pensions system at?
The key components of the new system have been set out in the Pensions Act 2007 and the Pensions Bill which was published in December 2007.
However, not all of the detail of the new regime has been finalised. The Bill is still being considered by Parliament and is therefore subject to amendment. Regulations are yet to be drafted.
We will update these pages as and when outstanding issues are resolved.