Auto enrolment set to double private pension income
With one of the biggest shake-ups in pension regulations just around the corner, the Department for Work and Pensions (DWP) has released research suggesting that automatic enrolment could make a huge difference to private pension income.
Pension auto-enrolment is due to come into force for the largest organisations in October 2012, and will be rolled out to other companies depending on size in following years. The smallest firms will be stepping into line in 2017.
The DWP research reveals that automatic enrolment could almost double private pension income at retirement for employees who are starting now. Without these reforms, the DWP estimates that the median weekly private pension income would be between £86 and £106 in 2070; with automatic enrolment it could jump to between £153 and £195 per week.
Numbers taking out private pensions have long been on the slide, and low earners, those working in smaller businesses and people aged between 22 and 29 have been particularly slow to join schemes. Savings in workplace pensions have fallen from £39.3 billion in 2007 to £35 billion in 2011.
Pensions Minister Steve Webb said:
"We are living longer, yet 11 million of us are not saving enough for retirement. Automatic enrolment will reverse this trend."
Nearly three-quarters of large business support the reforms. A representative from the TUC said:
"With two-thirds of employees not saving into an employer-backed pension scheme auto enrolment into workplace pensions cannot come soon enough."