Minister floats automatic rises for workplace pension savings

The government has commissioned a study to examine if workplace pension scheme members can be encouraged to save more by agreeing to have their contributions automatically increased annually.

The Department for Work and Pensions (DWP) is planning to evaluate a small number of case studies with employers which offer and contribute to pensions in their workplace, such as group stakeholder pensions. The first will involve insurance firm Legal & General.

Minister for pensions reform Stephen Timms said he hoped the results will provide valuable information on how pension saving via the workplace can be increased.

Methods of joining pension schemes, such as auto-enrolment, can be successful in encouraging people to save for their future, but employees do not always act to increase their contributions once enrolled. The study will research if such inertia can be overcome by pre-agreed increases in contributions.

Timms said: “This research is important to find out what works, and it represents another step forward in our commitment to explore and test approaches in the UK which make the most of pension provision in the workplace.”

Those participating in the study will have their monthly contributions increased annually on a voluntary basis. They will know when increases are taking place and by how much. They will be able to opt out, or start and stop increases.

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