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Following a ruling at the European Court Of Justice, insurers will no longer be able to take the sex of a policyholder into account to determine the price of their product from 21 December 2012. This will affect a plethora of products – car insurance, life insurance, annuities, health insurance, income protection etc. What is not clear yet is the size of the effect but it seems reasonable to assume that those who pay the least now (men for annuities; women for life insurance; women for car insurance) will see a rise in cost. Whether those who currently pay the most see a reduction in price is open to debate. The ruling relates to equality, not fairness

Kingston PTM are proud to sponsor local community groups and teams.

Currently we sponsor:

Ferndown Rotary:

Ferndown Wayfarers Cricket Club:

Longfleet Youth Under 8 Cubs Football Team:

PENSION REFORM

October 2012 sees the formal start of the Government’s latest round of root and branch pension reform.

Aimed at significantly increasing the take-up of private pensions by the currently unpensioned working population, the reform brings in the concept of “Auto-enrolment”.

“Auto-enrolment” basically means that within 3 months of becoming eligible, an employer must automatically enrol an employee between the ages of 22 and State Pension Age into a pension arrangement. That pension arrangement can be one set up by the employer or NEST (the National Employment Savings Trust, a scheme specifically set up for the purpose of “Auto-enrolment”). If an employee desires, they can opt-out once they have joined the new plan. What they cannot do, however, is not join at all.

Although contributions can be phased in to assist employers and employees with budgeting, the eventual contribution rates will be 3% of “band earnings” by the employer and 4% by the employee. A further 1% will come via tax relief making the total contribution 8% of “band earnings”.

“Band earnings” are those earning above the NI threshold up to £33,540 (uprated each year). However, an employee will need to be paying tax i.e. have earnings above £7,475 per annum to be eligible to join. Once they have passed £7,475 their earnings will be “backed up” to £5,035 for the purpose of calculating the required contribution. This measure is designed to ensure contributions of more than a few pence will be paid.

Employers will not be allowed to comment on the suitability (or otherwise) of “auto-enrolment” to employees. To do so would contravene laws on giving financial advice. Nor will they be allowed to hold the forms that allow employees to opt-out. All they can do is give the name and contact details of the pension provider – it is then up to the employee to make the necessary arrangements.

So what’s in it for employers? Well, nothing! Their contribution will be tax relievable but that is little consolation for the forced additional expense. Non-compliance will lead to fixed fines and, potentially, daily fines as well until the new requirements are met.

And employees are also likely to feel aggrieved at the new arrangements. Aimed specifically at those without pension provision – who, coincidentally, are likely to be those on lower incomes – it is almost certain to be viewed as just another tax on people of limited means. Those who do opt-out will be “auto-enrolled” every 3 years. They can opt-out again after each “auto-enrolment” but the Government hopes inertia will take over as a way of increasing the numbers who are “auto-enrolled” and stay in. Furthermore, the likelihood exists that those who have been “auto-enrolled” will labour under the false illusion that they have suddenly become adequately catered for, only to be disappointed at retirement.

Advice on Pensions reform will be paramount. What dates do specific employers have to comply by? Should an employer with a pension scheme already automatically use it for “auto-enrolment” purposes? Should an employee be “auto-enrolled” or should they opt-out? What resources will need to be diverted to cope with “auto-enrolment”? What happens with employees who receive bonus/overtime/commission?

There have been one or two comments in the press recently regarding the fact that savers are losing out quite substantially in interest payments by staying with low rate accounts. 

According to ‘Which?’ the Consumers Association, nearly half of 1,200 Savings Accounts in the UK paid interest of 0.5% or less.  If savers switched to accounts with the highest rates they could receive an extra £12billion per year.  Their general criticism of the bank and building societies who ran these accounts was that few of them made interest rates clear to customers on their statements and failed to tell customers about better rates available on other accounts.

The most important thing to emphasise, however, is that moving accounts on a regular basis and overcoming people’s general inertia, could generate much higher returns and income for them at a time of generally low interest rates.