Clarke Willmott

EMPLOYEES MUST THINK LONG-TERM OVER PENSIONS, SAYS CLARKE WILLMOTT

Law firm says introduction of “personal accounts” pension scheme will automatically enrol millions of UK employees in 2012

British workers must not let the current economic climate prevent them from thinking long-term over their pension provision ahead of the introduction of the Government‘s new “personal accounts” scheme, according to a leading employment lawyer.

From October 2012, all employees who do not already have pension arrangements will automatically be enrolled into the new savings scheme if their employer does not already provide an equivalent.

Sharon Latham, a partner in the employment team at Top 50 law firm Clarke Willmott, which has offices in Birmingham, Bristol, London, Southampton and Taunton, says around 60 per cent of eligible employees have still not joined a pension scheme even where, as is often the case, a generous employer contribution is on offer.

“The Government‘s aim with the introduction of these ‘personal accounts‘ is to close that gap,” says Sharon Latham.

“Employees will be enrolled into the scheme, or other pension arrangements, and the contrast with the former stakeholder arrangement is that people will need to positively opt out of the scheme, rather than take the trouble to opt in.”

Under the new scheme employers will be required to contribute 3 per cent of salary between earnings of £5,000 and £33,000, while employees will be required to contribute 4 per cent, with a further 1 per cent coming by way of tax relief from the Government.

“Millions of people currently face the scenario whereby they will reach retirement age and, as more of us live longer, will not be able to fund that retirement and so will be forced to work longer,” says Sharon Latham.

“With the recession continuing to deepen and the media full of bad news relating to pensions, it is understandable that people will be tempted to avoid taking action.

“However the reality is that the current situation will not last forever, and employees need to take a long-term view. The state pension may not be around when they retire, so it makes sense for people to seize the opportunity and act now by taking advantage of any contribution which may be on offer from their employer.

“The fact that so many people are still not doing so is the reason the Government is introducing the new system in 2012, which the new responsibility on employees of having to opt out, rather than opt in.”

ENDS 5th May 2009

For further information please contact Neil Fraser, Sturgess Van Damme, on 01275 349011 or email neil@sturgessvandamme.co.uk