The Department for Work and Pensions (DWP) has released figures suggesting that around 600,000 more people will be putting money into a workplace pension by the end of 2012 due to pensions auto-enrolment legislation.
This week, the DWP launched a national advertising campaign to raise awareness of employees’ new pension entitlements. From October, beginning with organisations of more than 250 people, employers will be required to automatically enrol eligible workers into a workplace pension. The Government has also estimated that by May 2015, due to the reforms, around 4.3 million more people will be saving for their retirement.
Steve Webb, minister for pensions, said: “By the time all employers are included, millions more people will be saving for their old age, with more than half a million new savers in workplace pensions by Christmas.
“Few policies affect as many people, and this will be a truly radical social change. All the international evidence shows people respond positively to automatic enrolment and I’m determined to make sure that pensions are no longer seen as the preserve of the few.”
Prior to the legislation, pension saving had fallen across all age groups, with the number of men saving into a pension down 59% and the number of women saving down 44% compared with 1997 levels. The aim of the legislation is to encourage more people to start planning for their retirement rather than relying on a state pension. Employers will also ultimately be obliged to make a minimum contribution of 3% of earnings to their pension scheme.
The CBI welcomed the figures. Neil Carberry, CBI director for employment, said: “As the UK’s ageing population continues to increase, we need more people to start recognising the value of saving for retirement.
“Auto-enrolment will help rebuild a positive savings culture in the workplace and encourage people to take control of their retirement plans. It will help the country adapt to the happy challenge of rising lifespans gradually over time, and avoid a future pension funding crisis.”