UK employers will be reimbursed for pension contributions this year under a new £2bn 'Kickstart' scheme unveiled in chancellor Rishi Sunak's summer economic update today.
The scheme aims to create hundreds of thousands of fully-subsidised jobs for 16-24-year-olds claiming Universal Credit and at risk of long-term unemployment.
Funding for each six-month job placement will cover 100% of the national minimum wage for 25 hours a week, plus the associated employer national insurance (NI) and minimum auto-enrolment contributions.
“So as well as employment, kickstarters could see contributions of up to £700 being paid over a full year into what for many will be their first pension,” commented Steven Cameron, pensions director at Aegon.
“This could grow to a substantial sum by retirement, helping avoid these younger employees falling behind in their savings.”
The chancellor also unveiled a temporary lifting of the threshold for stamp duty on house purchases till March 2021, providing a welcome boost for those looking to buy their first home or move up the property ladder.
“It also opens the door to retirees who are keen to downsize to free up equity in their homes to supplement pension pots, but who are put off doing so because of the bite stamp duty on their downsized property would take out of their gain,” Cameron explained.
As part of the government's plan for jobs, employers will also receive a one-off bonus of £1,000 for each furloughed employee who is still employed as of 31 January 2021.
Moreover, Sunak announced a £3bn green investment package that could help support around 140,000 green jobs and upgrade buildings and reduce emissions.
However, he remained silent on potential reforms to the pension tax relief system, and on temporary or permanent changes to the state pension triple lock.
There was also no update on reforms to social care, which Cameron said was crucial in the wake of coronavirus.
“With those in care homes being amongst the worst affected by the COVID-19 crisis, it’s imperative that the government tackles the long-standing issue of how to find a sustainable and fair means of funding social care, guaranteeing our most vulnerable elderly dignity in later life,” he continued.
“This is likely to require a sharing of costs between the government and individuals, based on their wealth. What’s vital is that people have certainty over what they’ll be expected to contribute so they can plan ahead and protect their inheritance aspirations.”
Author: Chris Seekings
Image credit: UK parliament