Employees would be willing to pay up to three times as much into the government’s National Pensions Savings Scheme (NPSS) as the amount proposed in the pensions White Paper.
Work and pensions secretary John Hutton yesterday announced a consultation on how to set up the NPSS, which would see employers paying 3% and employees 4% of their wages into the fund unless employees decided to opt out. A further 1% would be added through tax relief.
New research from the Department for Work and Pensions, launched to coincide with the start of the consultation, found that employees thought they should contribute between 5% and 10% of their gross salaries. The majority saw this as being an affordable amount that would go some way to providing an adequate income for their retirement.
The Department for Work and Pensions questioned members of 22 focus groups at the start of the year and found that the levels of contribution that the government set out in the White Paper were considered to be a fair balance of responsibilities.
This raises the question of whether staff would expect employers to increase their contributions in line with any excess they choose to pay.
“Automatic enrolment into a system of personal accounts will tackle the culture of under-saving for retirement and be good news for consumers,” Hutton said.
“We need to tackle the culture of under-saving, particularly among lower earners and we believe the best way to get more people saving is to automatically enrol them into personal accounts.”
He added that the government’s priority in developing the scheme would be to encourage industry to lower its charges, which could help people keep up to 20% more of their private savings.