The White Paper on pension reform includes two different styles to running a national pensions savings scheme. The first option follows the Pension Commissions call for a single organisation to provide the accounts with day to day running of the scheme, which is outsourced to a number of pension administrators.
The second option introduces competition, with a number of pension providers offering accounts to build on an existing pension structure, which is similar to a proposal by the Association of British Insurers, although theirs had a central purpose, to collect and reconcile contributions, allocate default providers and collate information.
The Department for Work & Pensions is thought to prefer the first option due to additional costs of the second, but the report showed that the second had an advantage because it built on existing provision.
Employees would be enrolled into the scheme, paying a 4% contribution, 1% from tax relief and 3% from the employer in the £5,000 to £33,000 salary band. There would be no further relief for higher rate taxpayers. The Government believe that around 10 million people would be eligible to join this scheme, and estimate that between 5 million and 8 million would remain in the accounts.
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Need we say more? has been predicting compulsory pension contributions for 6 years!