Compulsory Employer Pension Contributions
by Liam
Back in 2001, the government introduced Stakeholder Pensions as a means of encouraging more employees to save for retirement. All employers with 5 or more employees are legally required to offer a stakeholder pension scheme. If they do not, they can be fined up to £50,000.00. However, employers are not required to contribute to such a scheme. Accordingly, many employees haven’t bothered to join a pension scheme and the government is still concerned that employees are not saving enough (or at all) for retirement.
The Pensions Bill started making its way through parliament on 5 December 2007. In short if the Bill is passed, employees will automatically be enrolled in a pension scheme (unless they expressly opt out) and employers will be legally obliged to contribute at least 3% of each employee’s earnings (within a band). In addition employees who don’t opt out will have to contribute at least 4% and the government will give tax relief on contributions.
More information on this topic can be found here.
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