The government has recently announced changes to auto-enrolment pensions. These pensions are also referred to as workplace pensions.
One of the key changes is the age at which people will be auto-enrolled into a workplace pension. Presently the joining age is 22 but the plan is that this will be lowered to 18. The proposal is due to take effect from the mid-2020s.
Other proposed changes include removing the lower earnings limit. This means that the amount of money both the employee and employer contributes will be calculated on total earning. This limit is known as the “qualifying threshold” and currently stands at £5,875. The system will continue to apply only to people who earn over £10,000 a year.
The Department for Work and Pensions estimated that by removing this qualifying threshold it would create an additional £2.6bn in annual pension savings in 2020/21.
This will come from an additional £1bn in employer contributions, £1.2bn in employee contributions and £0.4bn in income tax relief.
Figures show that by lowering the age limit from 22 to 18 this would increase the number of eligible savers by around 900,000. Increasing the total annual pension savings by £770 million in 2020/21.The combined effect of lowering the age limit to 18 and removing the lower earnings limit would generate over £3.8bn in additional pension saving by 2020/21.
Why are these pension changes happening?
Auto-enrolment started to be phased in over five years ago now. Recent government figures estimate that around 38% of the working population are not saving enough for their retirement. That about 12 million people.
How Anstee & Co can with your retirement plans.
Our team of Independent Financial Advisers (IFA’s) can help with your retirement plans. They will look at all the options open to you. The first meeting is free of charge. In conclusion, sound financial planning is key to a secure retirement.
You can arrange a meeting with one of our expert financial advisers. We have offices in-
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The team also makes use of meeting rooms in Wellingborough, Towcester, Bedford, Grantham and Warwick.
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