Liberal Democrat News 05 October 2012
Originally published by UK Liberal Democrats
The pension revolution begins
The biggest change in pensions for over 100 years - automatic enrolment - began on Monday. Starting with the largest firms (those with more than 120,000 employees), employers will now be required by law to pay into a workplace pension for staff that do not opt out.
At least 0.8 per cent of their salary is paid into the pension and this is topped up by one per cent from their employer and 0.2 per cent in tax relief. For someone on an average salary of £20,000, it works out at around £309 per person per year.
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.
"We are proud to be introducing this truly historic change, which will radically alter the way we save for our old age, and see millions more people putting something aside for the future," said Minister for Pensions, Steve Webb.
"From last Monday, 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.
"If we can get between six and nine million more people saving in a pension by the time all employers are in, that's a genuine savings revolution."
Key facts about automatic enrolment:
- Around 11 million people are not saving enough to achieve the pension income they are likely to want or expect in retirement, and less than one in three 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 five years for men and three years for women
- Evidence from the Department for Work and Pensions suggests that, once automatically enrolled, less than one-third 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