From April 6, 2001 (i.e. the beginning of the 2001/02 Tax Year) the UK Government will be giving millions of workers their first chance to join low-cost pension schemes run by their employers. This was enacted into law with the Welfare Reform and Pensions Act 1999.

Firms with at least five eligible staff, including the management, must offer a scheme, unless alternative plans are available. Firms not offering one by October 8, 2001 face being fined £50,000 by the watchdog Opra(*). Most staff will be able to join the new scheme, provided they earn at least £3,825 per annum; this includes part-timers and contract workers. However, they will not be automatically eligible until they have worked with their company for at least three months.

Workers do not have to join these new schemes, but the realy advantage of this new type of pension is that you can contribute as little as £20 a month (though most advisers say this is too low to provide a decent income in retirement -- but it could help to augment your state pension if it is smaller than usual, e.g. if you do not have a full National Insurance Contributions Record). The maximum annual contribution will be £2,808, or the existing personal pension limits, if higher.

Stakeholder Pensions will also offer a tax break. A basic-rate taxpayer need contribute only 78p for ever £1 put into the plan, and higher-rate taxpayers can claim a further 18% rebate through their self-assessment tax forms.

(*) The Occupation Pensions Regulation Authority, set up by the Pensions Act 1995.

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