New ways for Gordon to help himself

The Queen's Speech is normally a fairly dull and turgid affair. So with a dour Prime Minister serving up his maiden offering this year it came as no surprise that the Queen's Speech was - a fairly dull and turgid affair. But Gordon Brown, using his years of experience as Chancellor, reconfirmed ever more ingenious ways of making sections of the population poorer.

Higher rate taxpayers, for example, won't be best pleased with the National Insurance Contributions Bill, which puts one of Brown's last tax reforms as Chancellor onto the statute book.

Currently, national insurance is levied at 11% on earnings above £5,200 and up to £34,840. Above the upper earnings limit, people pay 1% in NI contributions. From next year, the 11% band will apply to earnings up to £40,040. Hence anyone earning £41,000 will pay almost £500 a year more.

Meanwhile, the Pensions Bill confirms the Government intention to introduce an additional state pension system known as 'personal accounts'.

Due to start in 2012 - when the state pension age is expected to be 68 - employees will automatically join the scheme, unless they already have a good workplace pension or choose to opt out.

Contributions will be paid on earnings between £5,000 and £33,500 p.a. and there will be an annual ceiling on total contributions of £3,600. People will not be able to transfer funds from existing pension plans. Meanwhile. employees will pay in 4% of their salaries and employers 3%, with an extra 1% from the government in the form of tax relief.

The Pensions Act 2007 has already set up the Personal Accounts Delivery Authority, an independent body charged with getting the new system up and running. The next Pensions Bill will give the authority executive powers to carry out this task.

Best guesstimates are that 7 million people aren't putting enough money away to fund their retirement. The aim of the new system is to target these people who, more often than not, are low to moderate earners.

The Government also took the opportunity to announce that cash from bank and building society accounts left dormant for 15 years will be used to fund "worthy schemes" such as youth facilities.

However, the Dormant Bank and Building Society Accounts Bill does allow customers who later discover their money has been taken, to be able to reclaim their money. At present it's estimated that around £5 billion is lying unclaimed in the form of savings, pensions, endowments and shares.

07 November 2007 © Moneyextra.com

back

Moneyextra.com recommends you should consider taking independent financial advice before acting on any article. Please contact us for help with your individual circumstances if any assistance is required.