Pensions: Personal Accounts will be here in 2012

Wednesday, 4th November 2009 16:11 - by Resident IFA

Big changes are a’comin to work-related Pensions in 2012. The operative word being ‘changes’ – something the Pension industry seems never to be far from. After all, didn’t we have ‘A-day’ (aka Pension Simplification) only 3½ years ago? The Personal Accounts Delivery Authority (PADA) is responsible for delivering the next wave of changes - Personal Accounts. Eligible employees for Personal Accounts will be aged 22 to State Pension age and working full or part-time. The scheme is mandatory for all workers, in which 4% of their salary is taken away to be invested in their Pension. The employer will have to contribute a further 3% of salary. This said, the Department for Work and Pensions (DWP) has recently announced that employers will have to contribute only 1% in 2012 and increase their contribution to 2% three years later; the full 3% not being due until 2016. Under the Personal Accounts scheme, employers will only have to put in 3% of 'Band Earnings' (between around £5,000 and £33,500 a year). In summary (shamelessly ripped-off from PADA’s website!):  Personal Accounts are a trust-based occupational pension scheme regulated by The Pensions Regulator  Designed to meet all the requirements of the auto-enrolment reforms and designed specifically for low-to-moderate earners  Run in the interests of its members by a not-for-profit trustee corporation  Available to employers who want to offer the minimum contribution or more  Easy and low-cost for employers to administer and with low charges for members  Ready for the onset of employer duties in 2012 For those employers that already have (and contribute to) a Pension scheme in place for their staff, this perhaps won’t be such a shock, acting more as a complementary event. For those who do not offer, or contribute, to a Pension for their employees, this could be a huge culture shock and an unwanted extra expense. Hopefully, though, we will be out of Recession by then! As an Independent Financial Adviser (IFA), my jury is out. I have seen many well-intentioned Government-originated schemes mooted and implemented, but how many have been truly successful? Stakeholder Pensions, anyone?! Are you an employer who has only just found about Personal Accounts? What do you think of Personal Accounts? Do you think their effect will be beneficial or detrimental? Until next time...