DWP: 4.3m more pension savers by 2015
New figures reveal 11m people aren’t saving enough for their retirement, with pension saving falling from those in their 20s from 43 per cent to 24 per cent.
By the end of this year around 600,000 more people will be saving into a workplace pension due to the incoming auto-enrolment, but this will accelerate to 4.3m more people by May 2015, figures from the Department for Work and Pensions have revealed.
According to DWP, 11m people in the UK are not saving enough for their retirement. The figures show that pension saving has fallen across all age groups, but it is steepest among those aged 22-29, falling from 43 per cent in 1997 to 24 per cent today.
Both men and women are saving less, although pension saving has fallen further for men – down from 59 per cent to 44 per cent and from 49 per cent to 39 per cent for women.
From October, 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. The DWP describes auto-enrolment as the “biggest shake-up” in UK pensions for over a hundred years.
Up to 11 million people are expected to be eligible for automatic enrolment, with 6 to 9m newly saving or saving more in all forms of workplace pension schemes.
Under automatic enrolment, employers will eventually contribute 3 per cent of earnings, individuals 4 per cent of earnings, and there will also be 1 per cent of tax relief to make up a total contribution of 8 per cent.
Employees are able to opt out of the change, but they will not receive this extra contribution from their employer or the tax relief, or be contributing to a workplace pension. They will be re-enrolled every three years and be given the same option.
A new £3.5m advertising campaign was launched this week on TV, radio and across national and trade media to raise awareness of automatic enrolment among individuals and employers.
Steve Webb, minister for pensions, 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.”
Neil Carberry, director for employment at the Confederation of Business Industry, said: “As the UK’s ageing population continues to increase, we need more people to start recognising the value of saving for retirement.
“Auto-enrolment will help rebuild a positive savings culture in the workplace and encourage people to take control of their retirement plans. It will help the country adapt to the happy challenge of rising lifespans gradually over time, and avoid a future pension funding crisis.”