Spending Review: Auto-enrolment gets green light - Pensions - News | moneyfacts.co.uk


Moneyfacts.co.uk News brings you the latest financial & economic news & reviews of the best products in the UK by our team of money experts.

Spending Review: Auto-enrolment gets green light

Spending Review: Auto-enrolment gets green light

Category: Pensions

Updated: 21/10/2010
First Published: 21/10/2010

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

A scheme which will see employees automatically enrolled into a workplace pension has been given the green light in the spending review.

The National Employment Savings Trust, or Nest for short, is to be introduced in 2012 in an attempt to help people save for their retirement and encourage high quality pension provision from employers.

With concerns that people are not saving enough for their retirement never far away from the front pages, it is a move which has been welcomed by the pensions industry.

"We are pleased that the Government has been able to continue with the auto-enrolment process especially as current research suggests that 47% of people say that planning for retirement is their biggest financial concern," said Paul McMahon, corporate benefits managing director at Friends Provident.

"This decision will allow pension savers to benefit from both tax relief and employer contributions made into their qualifying scheme, in addition to their own contributions, when the requirements come into force in 2012."

However, people have been warned they could find themselves significantly worse off if they decide to wait the two years for the introduction of Nest before starting to save for their retirement.

According to Fidelity Investment Managers, a 25-year-old who puts away around £100 a month has the potential to be thousands of pounds better off in their pension pot if they start saving now rather than wait until 2012.

"The Government's new pension scheme, known as Nest, will see a big shake up for both companies and employees, but a real concern is the prospect of people sitting back until they are compelled to save - especially when many may be tightening their belts because of the uncertain economic outlook," said Julian Webb, head of UK defined contribution at Fidelity Investment Managers.

"Starting early simply gives people the opportunity to build a bigger pot by retirement - it also puts people in a better position to recover from falls in stock markets and interest rates. I'd suggest anyone with access to a company pension scheme, but who decided not to join, should reconsider that decision now."

Mr Webb added that sometimes potential pension savers needed to be reminded that company pensions usually include free money.

"With the average employer contributing 6.1% of gross salary to a private pension scheme, anyone on the average wage of £25,428 could get, free, an extra £129 a month," he explains.

"If they choose to add in their own money as well, then the Government will bump this up with tax relief."

Find the best pension for you - Compare pensions.

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.