14 June 2007
John Hutton, the Pensions Secretary has today announced that the
contribution limit for the proposed personal account will be
£3,600 a year (in 2005 earnings terms), rising in line with
earnings.
The Government propose to launch the personal account in
2012.
Employees will contribute a minimum of four per cent of their
'upper band earnings' the employer a minimum of three per cent and
one per cent from the Government in tax relief. 'Upper band
earnings' is the difference between the National Insurance upper
earnings limit and lower earnings limit.
For example, the 'upper band earnings' for this tax year is the
difference between £34,840 and £4,524 = £30,316.
Therefore, if someone had 'upper bands earnings' of £30,316,
the personal account contribution would be 8% of £30,316 =
£2,425.28, allowing scope for the employee to pay further
contributions up to the contribution limit.
