18th June 2008
Industry bodies have warned that proposed new rules on pensions could leave lower earners less well covered for their retirement.
The National Association of Pension Funds (NAPF), Association of British Insurers (ABI), Institute of Chartered Accountants and the Society of Pensions Consultants have jointly urged the government to make basic pay – including the personal tax-free allowance – the definition of Qualifying Earnings.
As it stands, the Draft Pensions Bill proposes that employers contribute 8% of employees' full range of earnings to personal pension accounts. The bill sets out that employee pay between £5,035 and £33,540 would be subject to a mandatory pension contribution from 2012.
However, industry bodies argue that discounting the £5,035 personal allowance could result in a reduction of private pension contributions, with lower earners losing out.
Mark Brooks, a spokesman for the NAPF, said that the personal impact on lower earners would be higher. However, he noted that "higher rate taxpayers would certainly be affected as well."
"Lower paid workers are also less likely to have a large amount of alternative savings, and their private pensions may be their only form of retirement savings," he told More Than Business News.
Joanne Segars, NAPF chief executive, stressed that "Existing workplace pensions are generally of higher value than the new statutory minimums to be introduced in 2012."
"Nothing should be done to undermine good provision," she added.
The groups also propose that an 'annual reconciliation' be made at the end of the year, to ensure that no one loses out under the new scheme.
Lower earners 'could lose out' under Pensions Bill
The National Association of Pension Funds (NAPF), Association of British Insurers (ABI), Institute of Chartered Accountants and the Society of Pensions Consultants have jointly urged the government to make basic pay – including the personal tax-free allowance – the definition of Qualifying Earnings.
As it stands, the Draft Pensions Bill proposes that employers contribute 8% of employees' full range of earnings to personal pension accounts. The bill sets out that employee pay between £5,035 and £33,540 would be subject to a mandatory pension contribution from 2012.
However, industry bodies argue that discounting the £5,035 personal allowance could result in a reduction of private pension contributions, with lower earners losing out.
Mark Brooks, a spokesman for the NAPF, said that the personal impact on lower earners would be higher. However, he noted that "higher rate taxpayers would certainly be affected as well."
"Lower paid workers are also less likely to have a large amount of alternative savings, and their private pensions may be their only form of retirement savings," he told More Than Business News.
Joanne Segars, NAPF chief executive, stressed that "Existing workplace pensions are generally of higher value than the new statutory minimums to be introduced in 2012."
"Nothing should be done to undermine good provision," she added.
The groups also propose that an 'annual reconciliation' be made at the end of the year, to ensure that no one loses out under the new scheme.
Tags: Office
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