Auto Enrollment Pensions
The government have decided that the ticking time-bomb of pension underfunding should be addressed. The DWP have therefore devised a scheme whereby almost all employees between the ages of 22 and state pension age, who earn over £8,105, will be automatically enroled in an employer scheme.
There is however provision for an employee to opt out at any time thereafter, should they wish to do so.
Initially, the minimum contribution will be 2%, 1% from the employee and employer respectively. This will be stepped, and eventually reach 8% by 2018.
Companies with one single employee/director will be exempt from auto enrolment, however, should a spouse or partner be employed, they may well be affected by the scheme.
Whilst many will see this as yet more interference by the state, it remains a fact that most people do not make adequate provision for their retirement, and contributing to a pension is an extremely tax efficient way of extracting funds from a limited company.