From April this year they will be able to contribute to a new form of stakeholder pension designed for lower to middle income workers and people working in firms that do not provide a pension plan.
B&CE, a non-profit-making organisation set up to supply employment benefits to the construction industry, has launched its own stakeholder pension called EasyBuild.
How does EasyBuild work?
Every week the worker pays a sum of at least £1 into the scheme and the money is invested on their behalf by B&CE. We are trying to encourage tradespeople to pay at least £5 a week to build up a reasonable fund.
Does the employer contribute?
From July 2002, under the National Working Rule Agreement, as long as workers save at least £5 a week, employers will contribute another £5.
What happens between now and 2002?
If the worker pays in at least £2.50, B&CE, in conjunction with the employer, will together contribute £5.
Carpenters and bricklayers will no longer have to rely on providence or dwindling state pensions to see them through old age
How much can an employee invest?
It depends on their age. At 25, the most they can save each week is 17.5% of their wages. This percentage increases until the employee reaches 60, when they can pay in up to 40% of their earnings a week.
What size pension can you expect to receive when you reach 65?
A 35-year-old investing £10 a week, including the employer's contribution, would have a £44,000 fund when they retire at 65 – based on a growth rate of 7%. This is used to buy an annuity, which would give an income of about £4000 a year. If the saver prefers, they can cash in up to 25% of the lump sum tax-free. The remainder is used to buy an annuity.
£4000 a year isn't very much
Saving £10 a week wouldn't provide a comfortable income on retirement but provides a basis on which to build. You can invest more.
How large a response do you expect?
Initially we expect there to be about 150,000 members receiving contributions from employers.
