Recently on the news they have been talking about this new scheme whereby people of my age will be offered the chance to pay 4% of my salary into a pension scheme. This will start with companies like tesco etc, then be rolled out. This is apprantly because where people are living ,onger the money pot for state pensions is becoming too small. This sparks some questions. Bearing in mind about a back they incresed my tax allowence because Im on a limited income.

Firstly will I still be expected to pay the tax ive paid in for years to pay m yh state pension if im paying this new tax? Will I also still recieve that pension one day?

If I opt not to pay this 4% will I be opting out of getting a pension full stop?

The press seem to praise this idea but I can see from here this is simply another income tax that will cost me £50 a month, because they cant organise the finances properly. Last year they realised we should pay less tax so I goy about a tenner back this year they want 50 per pay cheque. Anyone care to explain maybe ive misunderstood? Just feels like another kick in the teeth for generation x.

From my understanding:

 

- its optional for you, the main change is that they are automatically enrolling employees to try to encourage uptake - onus is on the employers to roll it out and sign you up

- it is NOT tax, it is a private/stakeholder pension contribution you would be making, your employer will top up anything you add to it too so there is a clear benefit for employees

- you will still get a state pension (if it still exists by the time we retire!) in addition to this new pension if you do stay enrolled in it

 

Hope that helps.

It's the government putting the onus of providing pensions onto employers, rather than the government themselves (or in reality, the tax payer).

 

Basically large companies must offer a form of defined contribution pension scheme to all employees; whereby the employer must pay into an approved pension scheme on behalf of their employees - but on condition that the employee also contributes. This is being rolled out to smaller companies over the next 3 years or so (I believe). Employees have the right to opt out - and if they do not want to contribute themselves then I believe they must; since it is unreasonable to expect your employer to pay in if you have no intention of doing so yourself!

 

The rest is as Misty says above - it's not an additional tax; but the opportunity to start your own personal pension fund (albeit one administered by your employer, rather like the current "stakeholder" scheme that has been with us for 8 or so years now); and have your employer make contributions on your behalf.

 

Do remember, however, that where employers are forced to pay into staff pension schemes; there is nothing in law that says they cannot do this as part of a future salary review! And (speaking as a company finance director) companies do not like being forced to increase their overheads; so if an employer has to contribute (say) 4% of your gross pay into a pension scheme, then be aware that they might consider that extra 4% to be your pay rise for the next year or two!!

 

Richard:cool3: