18th September 2006

National Pension Savings Scheme (NPSS)
The National Pensions Savings Scheme (NPSS) is a way of trying to make every UK person save money for a pension and reduce the burden of an ageing population on the tax-payer. The Government plans to introduce the NPSS in 2012.

Employees who are not covered by adequate personal or work pension schemes are automatically enrolled into the NPSS. The onus is on the employee to 'opt-out' if he/she does not want to join.

The Treasury already has to find upwards of £50bn a year to fund state pensions. This cost is set to increase as more people enter retirement. By trying to persuade people to save now, it hopes to ease the scale of the problem in the future.

The NPSS Scheme should increase the number of people saving. It encourages people to take personal responsibility for their own pension provision, rather than just sit and wait for a state handout.

Standard Life however says that the NPSS could actually be harmful to people who are enrolled after the age of 40 because any pension benefits could be outweighed by them losing rights to certain means-tested benefits.

Some critics fear that companies will reduce the amount they pay into staff schemes because the auto-enrolment would result in them paying contributions for a larger number of employees and push up payroll costs.