Money News
Government proposals to allow automatic enrolment into contract-based pension schemes from 2012 have been welcomed by the industry and described as a 'significant step' in giving companies that offer the schemes the same rights for as those providing trust-based arrangements.
Tony Pugh, UK head of DC pension services at consulting firm, Mercer, said: "Organisations that are strategically reviewing their approach to defined contribution pensions should now be able to compare more objectively the merits of trust-based and contract-based arrangements. They can now have more confidence that neither will be regarded more favourably in the context of Personal Accounts. Those employers who already offer contract-based arrangements to their employees now have one less thing to worry about around the impact of Personal Accounts."
The majority of employees will benefit from auto-enrolment in contract-based schemes as they will automatically receive additional employer contributions which they may have lost had they not actively chosen to join their employer's scheme.
Contract-based workplace pension schemes have become increasing popular with employers according to a survey by Mercer in 2007. It found that around two-thirds of all occupational pension schemes set up after 2002 were contract-based. It also found that employers had been concerned about the impact of Personal Accounts on their existing pension arrangements and were not clear on what tests they would have to meet in order to use these as alternatives to Personal Accounts.
21 May 2008 © Moneyextra.com
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