By Alexandra Morgan and Simon Bain

The Herald

Saturday 6 October 2012

Automatic enrolment into workplace pensions is a start, but people need to do more

Only a handful believe the state pension will be enough to live on, yet few are making adequate provision for when they stop work, with just 23% of the Scottish workforce paying into a company retirement plan, according to figures this week from Prudential.

In a bid to get more people saving, the Government this week introduced automatic enrolment into workplace schemes for over-21s earning more than £8105 a year and not already contributing.

Very large firms began auto- enrolling this week, with more to follow next year, while those with fewer than 500 staff will begin in 2014 and smaller businesses in 2015. Contribution levels will start low and rise gradually, until by 2018 they reach a total of 8% of salary. ......

...... David Scott, of Linlithgow-based independent financial advisers Alan Steel Asset Management, said: "I encourage my clients to push themselves to save as much as they can afford. There is not a hard and fast amount they should pay - the maximum annual allowance is £50,000.

"If an employer has a scheme, then I would encourage people to join it, as more often than not, the employer will contribute. This is free money in my book and it is madness to turn this down. However, take advice on the plan before signing up. If there is no employer scheme, then at that stage you would consider personal pension plans and, again, take advice from a reputable adviser."

Figures from Axa Wealth, meanwhile, show that four out of 10 people do not pay into any kind of pension. Mr Scott said: "Many younger clients I see don't have much scope to save because they have children and are often overstretched as it is. Pensions and savings for retirement, therefore, take a back seat."

He added: "It could also be that they are untrusting of pensions due to poor performance, or they have a lack of knowledge and understanding of the product and pension rules."

However, pension plans - workplace or personal - remain the most cost-effective way to save for old age, even if that means cutting back on more immediately gratifying spending to free up the cash.

Mr Scott explained: "You get tax relief on your contributions at your highest rate and the funds are invested in a tax-efficient environment."

Quote courtesy of The Herald
Saturday 6 October 2012