With the economy growing far slower than expected and inflation being so high with no potential for an increase in interest rates, I don’t believe the government should be introducing Workplace Pension reform from 2012. The potential knock on effects to the economy could be substantial because it will severely reduce the disposable income of many UK citizens. For those who are unaware of the new rules, the legislation will look to make all employed people pay up to 4% of their earnings into a pension scheme and their employer will pay a further 3%. This will mean that they take home 4% less each year and if their company has to pay into many pensions then this could mean that there would not be a pay rise offered in the same tax year.
Therefore the overall effect of these new rules on people’s available cash will be significant. Although there will be the option to ‘opt out’ of these payments, which many people will do, there is no doubt that the overall effect on the UK economy will not help it achieve the predicted growth figures which it needs I order to get out of debt as quickly as anticipated.