The biggest change in pensions for over a hundred years – automatic enrolment – started this week with the largest employers in the UK, who now have a new legal duty to automatically enrol workers into a qualifying workplace pension scheme and make contributions towards it.
By the end of the year, DWP expects that around 600,000 more people in the UK will be saving into a workplace pension and that by May 2014 about 4.3 million people will be saving for their old age.
Pensions Minister Steve Webb said that if the new rules could ensure that between 6 and 9 million more people saving in a pension by the time all employers are in, it would be "a genuine savings revolution".
"We are proud to be introducing this truly historic change," he said, "which will radically alter the way we save for our old age, and see millions more people putting something aside for the future.
"From October, we will start seeing large firms, such as banks and big supermarkets, automatically enrolling their staff into a workplace pension. Between now and 2018, more and more employers will come on stream - right down to the smallest ones."
Joanne Segars, chief executive at the National Association for Pension Funds (NAPF) called the new laws "a game-changer".
She said: "The UK is drifting towards an iceberg when it comes to paying for its old age, and we need radical reform like this. Things have got to change. Less than half the workforce is saving into a pension and, without auto-enrolment, millions would end up scraping by on the state pension alone. Putting everyone into a workplace pension will help reverse years of decline in retirement saving."
"It's important that people are put into well-managed, high quality pensions that offer good value for money. We have to bolster faith in the system, and there's no point bringing workers into a bad pension which they then turn their backs on."
The NAPF also released new research which revealed that, of those in employment, two in three people (65%) say they are likely to stay in their new pension. This confirms studies carried out by DWP which suggests that, once automatically enrolled, less than one-third will take the active decision to opt-out. In the United States, case studies show that auto-enrolment dramatically increased membership of similar schemes among new employees and all parties hope that trend will follow here.
John Cridland, CBI director-general, reacted positive saying UK business leaders also supported the move 100%.
"The message from business is: "we're in". Firms are committed to helping staff achieve a good income in retirement, and the hope is that auto-enrolment will encourage employees to think long-term about their finances to achieve this goal."
First published 01.10.2012
azeevalkink@wilmington.co.uk
