Pension reform to boost take-up

The largest shake-up of the pension system in more than a century will mean more than half a million people will be saving for one for the first time by Christmas, according to the Government. Employees are to be automatically enrolled into schemes.

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New 'opt-out' pension scheme could cause 'false sense of security'

The new 'opt-out' pension scheme where employees are automatically enrolled in to saving for their retirement could cause a false sense of security among savers, says Ros Altman:

I see a real danger of people being lulled in to a false sense of security. A lot of people have no idea just how much you need to save to provide a decent pension.

– Dr Ros Altmann, Director-General of the Saga Group

Duncan Smith: '11 million people don't save enough for retirement'

11 million people in the UK don't save enough for their pension at the moment according to Iain Duncan Smith:

Saving in pensions is falling dramatically, and that means that people will be retiring without the right savings. 11 million people don't save enough for their pension at the moment.

– Iain Duncan Smith, Work and Pensions Secretary

Less than a quarter of young people save for retirement

According to government figures, fewer people are saving for their retirement nowadays and the numbers are dropping. This trend is most pronounced among men and for people below the age of 30.

  • 24% of people aged 22-29 save compared with 43% in 1997
  • 44% of men save compared with 59% in 1997
  • 39% of women save compared with 49% in 1997

Iain Duncan Smith hails a 'vital reform'

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.

– Iain Duncan Smith, Work and Pensions Secretary

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11m people do not save enough for their retirement

  • 11 million people in the UK are not saving enough for their retirement.
  • Automatic enrolment will get up to 9 million more people saving.
  • Pension saving has fallen across the board, especially among young men.
  • 600,000 more people will be saving into a workplace pension by Christmas and 4.3 million by May 2015, the Government predicts.

What does automatic enrolment mean?

Automatic enrolment is a new initiative by the Government to get more people to start saving towards their pensions.

Under it, employers will be required by law to pay into a workplace pension for all eligible staff who are over the age of 22 and earn more than £8,105 a year.

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%.

You can opt out but if you do you will not be eligible for the extra contribution from your employer or the tax relief, and you will be automatically re-enrolled every three years.

The scheme will kick in from October starting with the largest employers.

Read more about automatic enrolment here.

Over half a million people to start saving for a pension

More than half a million people will be saving in a workplace pension for the first time by Christmas as a result of automatic enrolment, according to the government.

The Department for Work and Pensions says that number will swell to 4.3 million people by May 2015.

The Government is hailing the introduction of automatic enrolment as a major milestone Credit: Gareth Fuller/PA Wire

Automatic enrolment - where employees will start automatically paying a proportion of their salary into a pension fund unless they opt out - will be introduced from October onwards. It marks the biggest change in pensions for more than a century.