New figures released by the Department for Work and Pensions (DWP) suggest that more than half a million people will be putting money into a workplace pension fund by Christmas this year and that the auto-enrolment scheme to be introduced from October will increase the number of people paying a percentage of their wages into a pension fund.
Commenting on the new scheme, Minister for Pensions, Steve Webb, said:
“This October we can celebrate a major milestone automatic enrolment is the biggest boost to pensions for over a century. By the time all employers are included, millions more people will be saving for their old age, with over 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.”
The figures show that 600,000 more people will be saving in a workplace pension by the end of the year, with 4.3 million more people expected to be doing so by May 2015.
Currently 11 million people across the UK are judged to be not saving enough for retirement, with those aged 22-29 being the biggest culprits. Only 24% of people in this age bracket are saving in a pension, in comparison to 43% in 1997.
With the auto-enrolment scheme, up to 11 million people are expected to be eligible, with six to nine million newly saving or saving more in all form of workplace pension schemes.
When this scheme is fully up and running, employers will eventually contribute 3% of earnings with employees adding 4% of their earnings. A further 1% of tax relief will increase the total contribution to 8%.
Secretary of State for Work and Pensions, Iain Duncan Smith, said:
“This is a vital reform and I’m proud the Coalition has made it a reality. Automatic enrolment will get up to nine million more people saving into a workplace pension and for many it will be the first time they have had the opportunity to save. It will allow people to start planning for their retirement and this will make it easier for them to start putting something aside, along with a contribution from their employer.”