News

14/12/2009 - Time to start saving for the future

A Nationwide scheme designed to get us saving for retirement has been delayed for a year.

The move, buried in Alistair Darling’s pre-Budget Report on Wednesday, will save £2.4bn.  but the latest delay was condemned by experts as a disaster for more than half of the UK’s 22.8m private sector workers who aren’t saving into a company pension.

Billed as its answer to the UK pension crisis, the Personal Accounts scheme aims to encourage those on low and middle incomes to save for their retirement.

More than ten million savers will be automatically enrolled into a work pension, with employers forced to pay into pensions for the first time.

This will start – as planned – in 2012, but will be phased in over a longer period.  All employers will be expected to open a pension by 2017 instead of 2015.

And workers will not benefit from full employer contributions of 3pc of their salary until 2017, a year later than planned.

This is the second delay to the scheme in just over three months.  In September, the Government quietly slowed down the phasing in pension from 18 months to four years.

With many experts questioning whether Personal Accounts will ever get off the ground, and the Tories expressing grave reservations about the scheme, what should savers do now?

As nobody really knows whether their employer is going to be one of the first or last to implement Personal Accounts this makes it a nightmare for those attempting to plan their retirement savings. 

The first rule is, if your employer offers a work pension – join it.  The scheme will either become part of Personal Accounts or it won’t sign up because it offers more generous benefits.   Either way, you’re onto a winner.

There is little point starting to save into a personal pension as your will not be able to switch this into Personal Accounts as things stand.  Pensions are meant to be long-term investments as they are typically invested heavily in the stock market.

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