New Pension Plans Will Automatically Enroll 18-Year-Olds Who Start Working
Unless they opt out of it, workers aged 18-years-old and above will automatically receive salary savings once the government begins extending its enrolment scheme. According to ministers who support the scheme, it would mean staff aged 22 years old and over with a salary of £10,000 yearly their employers will enrol without notification into a pension unless they opt out.
About 900,000 young workers will be under the new pension scheme. However, there will be no salary deductions. UK’s employers will be responsible for the provisions on the salary savings.
According to Work and PensionsSecretary David Gauke, it encourages a habit of saving. He said extending the habit to young people below 22 years old can help improve the spending habits of young and old employees with disposable income in the country.
According to ex-pensions minister Steve Webb who now works at Royal London as Policy Director, the government’s ideas are “great” and the automatic pensions enrolment helps newer employees prepare for their future easily.
The automatic enrolment programme is set at a minimum of 2% of earnings with 0.8% coming from the worker. The employer and the government’s applicable tax reliefs will make up the remaining 1.2%. The automatic contributions will increase to 5% by April 2018 and to 8% from April 2019 onwards.