The government has called on employers to start discussing whether or not automatic enrolment into company pension schemes should be the next step in solving the UK’s looming pensions crisis.
The government’s recent pensions White Paper has outlined plans to make businesses pay compulsory pensions contributions for their staff if they do not have suitable scheme in place, starting in 2012.
James Purnell, minister for pension reform, said that 4.5 million people work for employers that run pension schemes but do not save into them.
“The government is keen to work with employers to look at whether auto-enrolment into occupational schemes could encourage people to start saving now,” he told a seminar hosted by the National Association of Pension Funds.
“We know that where employers provide access to a pension scheme, only around a third of workers are currently members,” he said. “We therefore want and need to work with employers to see what more we can do to encourage employees to save – and the obvious option here is automatic enrolment.”
“We know automatic enrolment works,” Purnell added. “NAPF’s 2005 survey of its members’ occupational schemes found that where automatic enrolment was in place, 89% of employees stayed in the scheme compared to just 42% joining schemes without it.”