Guernsey and Alderney residents will be automatically enrolled into a new pension scheme, under plans being drawn up.
The Guernsey social security department is looking for a provider for its secondary pensions scheme, which will encourage the population to save more towards their retirement.
It is estimated that 60 per cent of the working age population, around 25,000 people, are not making any personal pension provision and are relying solely on the state pension.
The proposal is that islanders will start paying 1 per cent of their earnings to the scheme in 2020, increasing to 6.5 per cent in 2030.
The employer contributions will also start at 1 per cent in 2020, but will only increase to 3.5 per cent in 2030.
If the employee decides to opt-out, the employer will be required to re-enrol the individual into the pension scheme every two years.
Self-employed and non-employed people under pensionable age who make social security contributions would also be auto-enrolled.
As there is no employer in these cases, the auto-enrolment would be done by the social security department but self-employed and non-employed people who had been enrolled would be able to opt out.
A detailed set of proposals for the scheme’s design and implementation now has to be developed and brought back to the states by September 2018.
A new law would then need to be drafted and brought into force, together with all the necessary administrative arrangements.
The committee for employment and social security is, in the meantime, looking for a pension provider for the scheme, with applications due by the end of September.
Michelle Le Clerc, president of the committee, said that this is a pre-qualification process for “due diligence of potential providers to ensure that any potential supplier(s) has the appropriate experience to provide the scheme on the scale expected”.
She said: “If accepted, they will then be invited to tender for the provision of the services later this year."
Auto-enrolment was officially launched in the UK in October 2012 and by 2018, when the roll-out is complete, it is expected that up to 11m people will be newly saving or saving more as a result.
Guernsey is not included in this legislation, as its jurisdiction is not part of the UK.
A total of £17bn a year will be going into workplace pensions by 2019 to 2020 in the UK as a result of auto-enrolment.
According to Andy Tarrant, head of policy and government relations at auto-enrolment provider The People’s Pension, "the ambitions for universal coverage contained in the Guernsey proposals are to be welcomed".
He said: "By bringing in the non-employed and the self-employed at inception, Guernsey is ahead of the rest of the UK."
"The DWP is currently examining how the self-employed could be brought in as part of the 2017 Review of automatic enrolment and we hope that it will follow Guernsey’s lead,’’ he concluded.