Pay Attention If You Earn Less Than £33,500 - Published:27/11/07
Stakeholder pensions were once thought of as the pallid knight which would come to the rescue of a very distressed UK retirement fund system The initiative saw many employers setting up make new schemes which promised easy access to employees across the land, while promoting a vast add to in pension saving into the bargain But several years on, four out of five schemes lie as nothing more than empty shells and the system continues to teeter on the brink of tragedyGovernment reforms to confidential pensions will see the introduction of Personal Accounts in 2012 This initiative will have the same underlying purpose as low-charging stakeholder pensions - to encourage more populace to save for their retirement - but this occasion there will one or two key differences that will set them separately from schemes that have gone beforeFor one thing Personal financial records will operate under a system of auto-enrolment This means employees will automatically become members of a work-based scheme if not they specially choose to opt outWhat's more, employers will be expected to make compulsory contributions of 3% of band pay (the group is expected to range between £5,000 and £33,500) which will be phased in gradually from 2012 at a rate of 1% per annum over a three-year periodMeanwhile, workers will make their own contributions of 4% with the administration topping that up by a further 1% through tax release This means the total payments to the system will equate to 8% of earnings between £5,000 and £33,500Employers which present an existing pension will have the correct to retain their original scheme as extended as employees are auto-enrolled and the minimum contributions are madeThe Pensions Policy organization (PPI) expects between four million and nine million new savers to contribute But given that the self-employed will be barred and the opt-out rate is unknown, I'm concerned that the amount of people who will fail to see any benefit from the new scheme could be significantIt's simple to see how auto-enrolment should do away with populace's inertia about making pension contributions, but the code comes with inherent drawbacks After all, participation will be compulsory when it isn't necessarily suitable for the individual concernedFor example, required contributions may be not be affordable for lower earners or those with senior levels of personal debtThe additional costs faced by employers in setting up the system and enrolling members could consequence in a lower incidence of more generous aid rates Currently, 15% of private sector work-based schemes provide employer contributions which exceed 3%, but the novel scheme could see this percentage drop as costs riseShould employers decide to contribute no more than the 3% minimum, then by 2050 total contributions could be £10 billion inferior than it would have been without these reformsIf, however, employers decide not to pass on the costs of the novel scheme, the total annual pension payment made by a combination of boss, employee and state payments, could increase by around £10 billion in 2012, according to the PPIThat's why it's extensively accepted that for individual Accounts to be considered a success, employer aid must exceed the compulsory 3% rateThe Government's attitude to UK retirement fund provision has often been criticised for its impact on means-tested reimbursement and the subsequent disincentive for lower earners to save for their retirement Many persons have found that near to the ground levels of pension income have adversely affected their eligibility for means-tested benefits including the pension praise, housing and council tax benefit It seems a ridiculous situation that some people are no better off after economy into a pension, if those savings are efficiently ‘cancelled-out' by a reduced -- or worse still, a annulled -- entitlement to state benefitsFor Personal Accounts to labor there is a need for what the PPI pass on to as a ‘pension income disregard' which means the first slice of an person's pension income won't have an impact on their entitlement to means-tested reimbursement Under the current system there is a disregard for capital which allows the first £6,000 of capital - such as store explanation savings or individual savings explanations (ISAs) - to be inexpensive when calculating entitlement to means-tested benefitsTreating pension income in a similar way is, in my sight, crucial to the success of the reforms as this reduces the danger of inferior earning individuals participating in a system which might otherwise be unsuitable To closely align a novel pension income disregard with the current capital disregard would mean an person could save at least £6,000 in a Personal explanation, without affecting their entitlement to benefits This should give a obvious message of the value of saving with a retirement fund income disregard, resulting in higher returns from economy in a Personal AccountUndoubtedly the concept will evolve further before its 2012 launch To battle the pensions crisis it must specifically target low to moderate earners who don't already have access to work-based retirement fund schemes, while ensuring that disincentives to save by compromising means-tested benefits are effectively dealt with firstAuto-enrolment and compulsory aid are certainly more radical than previous initiatives But only occasion will inform if they are the solutionCan't find what you need in Retirement And Pensions Try one of our other personal finance areas© patent 1998-2007, The Motley Fool Limited All rights kept This material is for personal use onlyPlace of Reg: England & Wales Company Reg No: 3736872 storage bin Reg No: 735 7818 01 Registered Office: 30 huge Pulteney Street, London.
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Internet banking more popular, expert says - Published:26/09/07
Internet banking is becoming a more popular method for Britons to manage their money, it has been claimedAccording to a spokesperson for Nationwide Building Society, the number of subscribers captivating benefit of its internet banking service has rocketed from 13,000 to more than three million in the last decadeAdditionally, the specialist predicted that the trend will continue, citing a MORI poll that exposed 86 per cent of internet banking users believe the portal to be secure"Customers have the expediency of banking from the comfort of their own home, or indeed wherever they are in the world, together with many additional reimbursement such as discounts and paperless statements," she remarkedThe society spokesperson also said that other online portals are proving well-liked, in adding to internet banking, with savings accounts available via the web also contribution consumers the "highest-paying instant access" to their cash Vodafone lately unveiled a service that is an evolution of internet banking, with its mobile banking put to be available to Britons via their own handset for a variety of banks and financial services providersmonetary services provider unveils online banking constituent for student account - Wed, 20 Jun.
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Tesco savings accounts 'follow base rate increase' - Published:15/05/07
Tesco Personal Finance has increased the rate on its immediate access savings vehicles following last week's choice by the Bank of England to add to the base rate to 550 per centFrom June 20th, customers will see the tax on their Tesco savings accounts add to by 025 per cent, with rates depending upon the amount investedsavings of between £1 and £3,000 will benefit from an increased interest rate of 435 per cent, with money over £50,000 enjoying an interest rate in line with the bottom rate of 550 per centCustomers who open a new Tesco savings explanation before June 19th will also benefit from an additional 1,000 association card points, provided they have investments of at least £1,000Jeremy Sutton, head of savings and investments at Tesco Personal Finance, supposed he was interested in how many other providers were passing on the interest rate go up to their customers"We are committed to offering great worth to our customers and rewarding them for choosing.
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