Changes to UK Work Based Pensions
In a recent move by the Government in an attempt to enhance and prolong the standard of life among working class families It is now mandatory for all UK limited companies to offer their employees a pension plan. The introduction of the new pension plans is expected to pile more misery and strain on UK business owners to abide by the new processes that make it mandatory to offer some sort of private pension plan to employees.
The move has been criticized by many UK limited companies due to the added financial pressure this heaps on already struggling businesses.
The basic state pension
The basic UK state pension is a regular weekly/monthly payment from the government once you qualify for a state pension. Under the pensions act 2011, the state pension age is currently set at 65 years of age for both men and women.
State pensions were introduced by the government to help keep senior UK citizens financially secure by offering a regular source of income once the individual had retired from all forms of work and was no longer receiving a regular income. The state pension helps to fund individuals with a low disposable income who were unable to actively pay into a private or work based pension throughout their working live.
With the current maximum weekly amount set at £119.30 the government have set about introducing a total reform in order to enable many more individuals to actively contribute to a private company pension with an added tax relief.
How Work based Pensions Work
A work based pension is a method of preparing and actively saving for your retirement that is arranged by your employer. Your employer will usually provide an equal contribution that will be automatically deducted from your payday check and placed into your pension pot. The contribution will usually amount to 25% of your weekly or monthly paycheck.
With the new pension scheme that has been rolled out throughout the UK all companies will have to automatically enroll their employees to take part and contribute in the scheme unless the employee chooses to opt out of the pension plan.
Based on which pension plan is currently on offer, new laws indicate that any individual over the age of 55 will have access to their savings as opposed to the minimum age of 65 that is currently in place for all state pensions. Employees will still be eligible for a state pension when they reach the minimum required age on top of their private work based pension, a move that has been widely praised by many leading pension firms.
How Work Based Pensions Will Affect Your Business
Many small business owners already face uncertain financial difficulties and have been quick to widely condemn the latest move put in place by the state. Many businesses will now face a mandatory contribution to any employees that wish to utilize the work based pension scheme unless that individual opts out.
With the average UK Salary £27,000 many working class families have stated that they do not have the disposable income to contribute into the new pension plans resulting in a larger number than first predicted to opt out of the imposed pension scheme. Research has shown that many families still need to turn to alternative methods of finance such as payday loans and credit cards in order to keep on top of monthly bills, a figure that has been backed up by the recent numbers that are currently choosing to opt out of the new schemes.
Lucky payday loans are still a hugely popular choice with many working class families and retired couples even since the new pension reforms have been announced. Only time will tell if the work based pension scheme can really become a success story