Pension reform excludes short term workers and the low-Paid

10 November 2010

Low earners and people in a job for less than three months will be excluded from the Government’s proposals to pressure all workers to save for retirement. Under the proposals, beginning in 2012, all employers (regardless of size) will have to enrol employees over the age of 22, and earning more than the income tax threshold of £7,475, to pay a percentage of salary into a pension scheme meeting minimum standards. There will be a default “National Employment Savings Trust” (“NEST”) for employers unwilling to set up or provide access to their own scheme and employees must actively take steps to opt out. The Government hopes that this measure will help reduce the huge pensions deficit that stood last month at a mammoth £179 million in the private sector alone.

However, Steve Webb, the Pensions Minister, has confirmed that there will be an “optional period” of three months so employers can delay before automatically enrolling a recruit in a scheme. This will avoid employers having to enrol the large numbers of starters who leave within weeks of starting a job and around half a million seasonal workers. The Government rejected calls for smaller employers to be excluded, saying that that would have deprived 1.2 million people of coverage, and would act as a disincentive on small businesses expanding.

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