Payroll Software News

Auto enrolment 'could boost pensions by 200%'

Posted by Editorial Team

New research from the Department for Work and Pensions (DWP) suggests employees private pensions could almost double under the automatic enrolment scheme.

Personnel who start their first job in 2012 could have far more money to retire on than those who have been working for several years already, the Workplace Pension Reforms: Baseline Evaluation Report shows.

According to the document, with the automatic enrolment median private pension incomes could rise to between £153 and £195 a week by 2070.

However, without the changes being implemented to payroll systems, the median weekly private pension income would only reach between £86 and £106.

The report reveals an insight into the pensions landscape before automatic enrolment, which will be introduced later this year and the preparations being undertaken by employers.

Pensions minister Steve Webb said: "This October, we will introduce the most important changes in pensions for a century to help people save and avert a pensions crisis in the future.

"We are living longer yet 11 million of us are not saving enough for retirement."

Mr Webb claimed the automatic enrolment scheme will help to "reverse this trend" as millions of people who currently do not have a private pension will be encouraged to start putting money aside.

He added that individuals could double their savings on top of having access to a reformed state pension.

The first report looking at the automatic enrolment initiative revealed nearly 75 per cent of large employers are in favour of the scheme.

It also found private sector pension participation has fell to 5.8 per cent (42 per cent) in 2011, which was down from 7.9 million (55 per cent) in 2003.

The demographic that showed the largest decline in participation was those aged between 22 and 29, along with low earners and those working for small and micro-employers.

Meanwhile, only 31 per cent of employers in the private sector currently offer an pension provision for their staff, which is down from 41 per cent in 2007.

Overall, the private sector workplace pension saving total has fallen from £39.3 billion in 2007 to £35 billion in 2011.

Following the roll out of the automatic enrolment scheme in October, research will be carried out annually and statistics updated to track the impact of the new initiative.

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