Over half a million new people saving in a pension by Christmas
- Published on Thursday, 20 September 2012 11:52
- Posted by Scott Buckler
Latest figures from the Department for Work and Pensions (DWP) show more than half a million people will be saving in a workplace pension for the first time by Christmas, thanks to the biggest shake-up in UK pensions for over a hundred years – automatic enrolment
From October, starting with the largest employers, bosses will be required by law to pay into a workplace pension for all eligible staff who do not opt out.
The DWP figures reveal that by the end of the year around 600,000 more people will be saving into a workplace pension. By May 2015, around 4.3 million more people will be saving for their retirement.
Iain Duncan Smith, Secretary of State for Work and Pensions, said:
"This is a vital reform and I'm proud the Coalition has made it a reality. Automatic enrolment will get up to 9 million more people saving into a workplace pension and for many it will be the first time they have had the opportunity to save. It will allow people to start planning for their retirement and this will make it easier for them to start putting something aside, along with a contribution from their employer."
Steve Webb, Minister for Pensions, said:
"This October we can celebrate a major milestone - automatic enrolment is the biggest boost to pensions for over a century. By the time all employers are included, millions more people will be saving for their old age, with over half a million new savers in workplace pensions by Christmas.
"Few policies affect as many people and this will be a truly radical social change. All the international evidence shows people respond positively to automatic enrolment, and I'm determined to make sure that pensions are no longer seen as the preserve of the few."
11 million people in the UK are not saving enough for their retirement. Pension saving has fallen across all age groups, but it is steepest among those aged 22-29, falling from 43% in 1997 to 24% today.
Both men and women are saving less, although pension saving has fallen further for men – down from 59% to 44% and from 49% to 39% for women.
Up to 11 million people are expected to be eligible for automatic enrolment, with 6 to 9 million newly saving or saving more in all forms of workplace pension schemes.
Under automatic enrolment, employers will eventually contribute 3% of earnings, individuals 4% of earnings, and there will also be 1% of tax relief to make up a total contribution of 8%.
Employees are able to opt out of the change, but they will not receive this extra contribution from their employer or the tax relief, or be contributing to a workplace pension. They will be re-enrolled every three years and be given the same option.