Government launches new pensions driveCampaign to get Britain saving for retirement

23 January 2012

Auto-enrolment will give millions of people a workplace pension for the first time.

The government today launched an £11m publicity campaign to let employees know about auto-enrolment and how workplace pension schemes will start to become universal from October 2012.  

Workplace pensions for all

Auto-enrolment is an initiative that aims to extend workplace pension schemes to employees who are not currently offered one - and to counter the current low levels people saving towards their retirement at work. From October 2012, employers with over 120,000 workers will be obliged to enrol anyone who earns more than £7,474 a year and is aged 22 or above into a pension scheme. Medium and small employers will come under a similar obligation in the months and years that follow, until all workers are automatically enrolled. 

Launching the new publicity campaign, Pensions Minister Steve Webb said: 'As we head into the final stretch before millions of people begin to be enrolled into a workplace pension, it is vital that we make sure that individuals and employers know what to expect.

'Auto-enrolment will transform this country, putting an end to the decline in pension saving, and setting millions on course for a more prosperous retirement.'

Minimum contributions

The move towards universal workplace pensions means that all employees will benefit from tax relief on their contributions and receive payments into their pension pot from their employer. Which? research into the 'pension gap' in 2011 showed how necessary such a change was, with just 6% of those aged between 16-24 saving for their retirement. People tend to start saving as they get older, but our survey revealed that for those aged 35-44 only 40% had a pension.

The aim of auto-enrolment is to give all employees an overall contribution level of 8%. This will be made up of 4% from the employee, 3% from their employer and 1% from the government in the form of tax relief. These levels should be achieved by 2017 but when the scheme starts, lower contribution levels will be permitted under special transition arrangements. 

Opt-out fears     

Although employees will be automatically enrolled into a qualifying pension scheme - either the employer's own or the National Employment Savings Trust (NEST) - it is possible for individuals to opt-out and stop having contributions deducted from their pay. 

Which? pensions expert, Ian Robinson, said: 'Those who opt-out may be tempted to avoid making contributions but they could lose out in the long term. Pension saving in an employee scheme is a great way to save for later life. The employer contribution is like extra pay, and the government offers tax relief on top of this. For younger workers, auto-enrolment is particularly beneficial. The portability of NEST means they can take the same pension pot with them as they change jobs, and avoid any penalty for doing so.'

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