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New pension scheme launched

01.10.12

The new pension auto-enrolment scheme launches today, which will affect millions of workers across the country over the coming years, but if you’re a self-employed contractor providing services with Consort then it won’t affect you.

The new scheme is being launched in stages, starting with larger companies of 120,000 employees or more, with the government planning to enrol the majority of workers onto a workplace pension by 2018. If an employee is not already on a workplace pension and they have a salary in excess of £8,105, they would be enrolled automatically. There is, however, a chance to ‘opt out’ at any time.

It is proposed that 600,000 employees will be enrolled by the end of 2012 alone. The final stage of enrolment will commence from January 2015, when firms with 58 employees or less will have to comply.

The change will benefit many people who either haven’t thought about contributing towards a pension, or simply haven’t got around to doing so. By having a workplace pension, you wouldn’t be relying solely on the state pension to live once you retire.

If you are over the age of 22 and choose not to opt out of the scheme, you will automatically pay, out of your qualifying earnings (before tax), a minimum of 0.8%, your employer will pay 1% and the government will pay 0.2%. These percentages will rise to 4%, 3% and 1% respectively by 2018.

In contrast using contractors to deliver services, recruitment companies and end clients can avoid the hassle and the financial restraints of contributing to additional pensions. These organisations would only have to worry about contributing to their own employee's pension schemes.

Research conducted by Prudential discovered that 46% of Britain’s self-employed have no private pension plan.

Under the new scheme, as a self-employed contractor, you will not be affected. By being self-employed, you have the freedom and choice to choose what pension scheme is best for you, without needing to ‘opt out’ of one which you may not necessarily want. However, it is advisable to sign up for a private pension scheme sooner rather than later.

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