Starting with the largest employers, bosses will be required by law to pay into a workplace pension for all eligible staff who do not opt out. Anyone over 22 years of age, currently earning more than £8,105 and working for an employer who is affected, will be automatically enrolled.
With the auto-enrolment process rapidly approaching, consumer groups and pension companies have called for the Government to do more to advertise the scheme, especially given the current lack of awareness.
According to the Scottish Widows Workplace Pensions Report 2012, 52% of workers are unaware of the changes being presented from 1 October. These figures are even lower among workers earning less than £20,000, with only 30% knowing about these reforms. A spokesman for The Department for Work and Pensions said:
“This programme will be brought in gradually over the next five years, so it is understandable that some people will not be aware of these changes.”
Initially only larger companies (employing more than 120,000 people) are required to comply. Smaller companies will be signed up gradually with all firms employing over 1,250 staff being involved this time next year.
To begin with only 1% of employee’s wages will be deducted and placed in a pension scheme. This will include tax relief, so in effect they will only lose 0.8% of their net pay. Employers must also add an additional 1%, although they can add more.
These will increase over time and by 2018 employees will pay 5% with employers adding a further 3%.
The Department for Work and Pensions (DWP) has today released a series of advertisements starring well known bosses such as Theo Paphitis and Karren Brady to help raise awareness of these impending changes.
The advertisements, which will be broadcast across all platforms including ITV, Channel 4, Sky, Channel 5, commercial radio stations and online, as well as print advertisements across the national press, key magazines and the business and trade press, will run until mid-October at a cost of £3.5m. The total awareness campaign on automatic enrolment will cost £8.1m.
Pensions Minister, Steve Webb, said:
“I’m delighted that well-known bosses have taken part in our latest awareness campaign, and back the biggest change in pensions for over a century – automatic enrolment.
“People should know that all they need to do is look out for a letter from their employer, and if they do nothing and stay ‘in’ they are effectively getting a pay rise.”
The DWP has stated it expects two- thirds of individuals to say “I’m in”, with only 9% in a DWP survey saying they would definitely ‘opt out’ and choose not to take part.