At present employers do not have to contribute into a pension scheme for their employees and many choose not to. As a result, as a country we are under-saving for retirement.
Minister for Pensions Steve Webb said:
“This Bill will radically transform the pensions landscape in this country. Millions of people, who currently have little or nothing put by for their retirement will, from 2012, find themselves enrolled in a workplace pension – setting them on the road to a more secure future.”
From 2012 employers will be required to automatically enrol eligible employees into a qualifying pension scheme. The measures included in the Bill will take forward the recommendations of the recent independent review of auto-enrolment to ensure that there is a balance between costs and benefits for individuals and a more proportionate impact on employers.
Middle earners after the reforms could be gaining well over the equivalent of a year’s pay if they chose to save in a workplace pension. Based on employer contributions of 3 %, people earning an average income could gain an extra Ã‚Â£650 a year – or around Ã‚Â£30,000 over their working life by contributing to their pension.
Lord Freud said:
“We know that the younger people start to save, the better off they will be in retirement and that’s why automatic enrolment will be so crucial. The measures in this Bill will provide a fair deal for workers in retirement, ease the burden on business and provide a sure foundation for pensions for generations to come.”
The Pensions Bill will implement measures in the Making Automatic Enrolment Work review and the Command Paper ‘A sustainable State Pension: when the State Pension age will increase to 66’. It builds on reforms set out in the Pensions Act 2008 and Pensions Act 2007.
The Pensions Bill will bring forward the rise in the State Pension age for men and women to 66 by 2020 so that the State Pension remains sustainable and fair for the future, given rising rates of longevity.