Employers give backing to pension changes

26 August 2010

A small majority of employers say they support plans to introduce the automatic enrolment of employees into a workplace pension scheme.

A survey of 2,500 employers, carried out by the Department for Work and Pensions (DWP), found that 56 per cent of those polled backed the plans.

Employees, too, favoured the changes, with 64 per cent of eligible workers surveyed saying they thought the proposed plans were a good idea.

The purpose of the auto-enrolment scheme is to encourage more people to save for their retirements.

Currently, seven million Britons are not saving enough to deliver the pension income they are likely to want, or expect, in retirement, and 2.5 million fewer employees are saving in a private sector occupational pension than in 1995.

Of those employers who already make employee pension contributions of 3 per cent or more, some 94 per cent said that they intend to maintain or increase their level of contribution when it becomes compulsory to provide pensions for all members of staff.

What's more, 81 per cent of employers indicated they would match or better existing pension contribution levels for employees who have not been members of a scheme and for new recruits.

With 1,000 eligible workers also questioned as part of the survey, 64 per cent said they would stay in the scheme once they had been automatically enrolled.

Nine out of ten employees cited employer contributions as an attraction of the scheme, while three-quarters thought they could afford to contribute 4 per cent of their salaries to a pension fund. A half of those who believed they would continue to save for their retirements once enrolled in the scheme actually predicted they would contribute more than 4 per cent.

Lord Freud, the DWP Minister, said: "With only around half of employees saving into a workplace pension, our planned reforms are needed to prevent millions of Britons facing a penny-pinching retirement.

"It is encouraging that, despite the recession, the majority of employers are still in favour of pension savings. We will work with business and the industry to make automatic enrolment work, so we can give millions more people the chance to save, and an independent review team is currently looking at how we get the details right."

The workplace pension reforms will require employers to automatically enrol all eligible workers aged between 22 and state pension age into a qualifying workplace pension scheme, unless the worker chooses to opt-out.

Employers can enrol employees into an existing pension scheme which meets or exceeds the minimum requirements set out in the reforms; amend their existing scheme to meet the qualifying standards; set up a new qualifying scheme; or enrol workers into the National Employment Savings Trust (NEST).

In the summer, the government created an independent review of how best to manage the new pensions system. The results of the review are expected in the autumn.