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Pension revolution starts today

Monday, October 1 2012

pensions

Automatic enrolment, the biggest change in pensions for over a hundred years, starts today (Monday).

Starting with the largest firms in October, employers will now be required by law to pay into a workplace pension for staff who do not opt out.

By the end of the year, around 600,000 more people in the UK will be saving into a workplace pension and by May 2014 about 4.3 million people will be saving for their old age.

Currently, around 11 million people are not saving enough to achieve the pension income they are likely to want in retirement, and less than 1 in 3 adults are contributing to a pension, while people are on average living longer - in the past 25 years, life expectancy at age 65 has increased by 5 years for men and 3 years for women.

Evidence from the Department for Work and Pensions suggests that, once automatically enrolled, less than one-third of people will take the active decision to opt-out. In the United States, case studies show automatic enrolment dramatically increased membership of similar schemes among new employees.

The employer is also compelled to provide a minimum level of contributions. Minimum contributions start at 1% and, by October 2018, build to 4% for employees. This equates to 8% overall (employer at 3%, employee at 4%, and tax relief at 1% combined) of a band of earnings.

Visit the Department of Work and Pensions website for more information.

Iain Duncan Smith
Automatic enrolment will get up to 9 million more people saving into a workplace pension
Iain Duncan Smith