680,000 in the East to be “auto-enrolled” on pensions
PUBLISHED: 06:30 22 September 2012
Some 680,000 workers in the Eastern region could soon be automatically enrolled onto a pension as part of a government drive beginning next month.
The plan will create extra costs for some businesses and, coming as the recession continues to bite, may also mean workers taking home less cash each month.
Yet East Anglian business figures broadly welcomed the coalition’s ‘auto-enrolement’ plan, accepting that it would help prevent a future pension funding crisis.
Minister Steve Webb said that the move was needed to ensure people had enough money to live in retirement. He added: “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 see that pensions are no longer seen as the preserve of the few.”
Government figures show that some 11m people are not saving enough for their retirement. The proportion of those saving has fallen in recent years across all age groups, but is most acute amongst those aged 22 to 29, falling from 43pc in 1997 to 24pc today.
In the Eastern region only 41pc of employees, around 471,000, are enrolled in any sort of pension schemes – meaning there are 678,000 who are currently not enrolled.
Under the government’s plan all companies will have to set up a pension scheme for employees and anyone over 22, earning over £8,105, will be enrolled.
Individual employees will be able to opt out but ministers hope people will see the benefits of putting some of their monthly wage aside for the future.
Individuals who do enrol will contribute 4pc of their wage, employers will eventually contribute 3pc of earnings, and there will be a 1pc tax relief, to bring the total contribution up to 8pc.
Work and pension secretary Iain Duncan Smith said: “It will allow people to start planning for their retirement and this will make it easier for them to start putting something aside, along with a contribution from their employer.”
From October 1 the largest employers, with 120,000 staff or more, must place eligible workers into schemes, with smaller firms then gradually having to take part over the next six years.
Smaller companies, with less than 50 employees, will not be pushed to take part in the scheme until 2015, but all companies must have some sort of scheme in place by 2017.
Communications and policy manager at Norwich based Aviva Alistair McQueen said: “Aviva has long been an advocate of auto-enrolment and fully supports the Government’s efforts in getting employees to save more for their retirement.
“We believe that any new savings generated as a result of auto-enrolment is a step in the right direction.”
Meanwhile Andy Wood, chief executive of Suffolk brewer Adnams, said: “With an ageing population we need more people to start recognising the value of saving for retirement.
“The legislation means we will need to implement this by 2014 at Adnams and whilst we may see a small increase in pension costs we believe auto enrolment to be a good thing.”