The prospect of workplace pensions for all has moved a step closer after the Government accepted a new set of recommendations.
The Government has agreed that all businesses in the UK should offer a pension scheme or be prepared to enrol their employees on the new National Employment Savings Trust (NEST) scheme.
It comes just days after proposals for a new universal state pension, which would see controversial means testing scrapped. The decision comes as part of a review into auto enrolment and the NEST initiative that is to be phased in from 2012. The agreement was announced by the Pensions Minister, Steve Webb, with between four and eight million workers set to be placed in a pensions scheme for the first time.
Staff will have to earn £7,475 a year to be eligible. Mr Webb said the initiative would bring an end to decades of decline in membership of workplace pension schemes.
Larger firms will join the NEST programme first, with the smallest completing the roll out of universal pensions towards the end of 2016. Contribution levels for employees and companies will also be phased in, with minimum levels set at 8%, with employers contributing at least 3% by October 2017. The agreement has drawn much praise, although it has not been universal
"If NEST didn't already exist, it would have to be invested to make auto-enrolment a success," said Tom McPhail, head of pensions research at Hargreaves Lansdown.
"It will be a no frills, but one which small employers can buy off the shelf."
The Federation of Small Businesses said it was extremely disappointed with the decision, however, saying that the Government had not listened to the needs of micro businesses – firms with ten employees or less – by making them exempt from auto-enrolment.
"The proposed changes are still complicated for micro businesses to put in place, and the FSB is concerned that these businesses do not have the expertise to choose a pension scheme for their staff," the organisation said.
"FSB research shows that seven in 10 business owners do not feel confident in choosing a pension scheme for their staff."
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