Reuters reports that the government has proposed an annual contribution cap to the new plan of Â£3,600 ($7,092), well below the Â£5,000 ($9,850) it had originally suggested. The cap will rise in line with future earnings.
Insurers, worried that a higher limit on the amount workers could put into the new plan would undermine the existing private pensions market, had been lobbying for the new proposed amount, Reuters said. Consumer rights groups had pressed for the Â£5,000 cap, but conceded that the index-linked cap will benefit savers in the future.
In May 2006, the government issued a pension reform proposal which included a National Pension Savings plan requiring contributions from both companies and workers, starting in 2012 (See UK Issues Formal Pension Reform Proposal ). Under the national scheme employees earning up to 33,000 pounds a year would contribute 4% of their wages to the plan, with their employer contributing 3%. The government would add 1% through tax relief.
In December, Work and Pensions Secretary John Hutton announced the adoption of the program, into which individuals would be automatically enrolled (SeeUK Officials Unveil Auto Enrollment Plan).
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