More employees are to be enrolled automatically into workplace pension schemes, the government has announced.
The Pensions Bill 2007 is to be amended to extend automatic enrolment to Workplace Personal Pensions (WPPs).
The Bill already allows employees to become members of trust-based pension schemes automatically.
Now the government has confirmed that automatic enrolment into contract-based schemes is in line with EU consumer protection directives and can be included in the legislation.
The change will take effect as from 2012.
James Purnell, the Secretary of State for Work and Pensions, said: “At present around £6.7 billion is saved into Workplace Personal Pensions annually by some three million employees, making it the second largest form of private sector pension membership in the UK.
“There are currently 4.7 million people who work for a company with a Workplace Personal Pension and are not members. This announcement will extend the benefits of automatic enrolment to millions more people – giving them the means to save for their retirement for the first time.”
Stephen Haddrill, from the Association of British Insurers (ABI), welcomed the announcement: “It is extremely good news that the government has confirmed its plans to include automatic-enrolment into workplace personal pension schemes as part of the 2012 pension reform package.
“The ABI has, from the start of this debate, consistently argued for this outcome to ensure that saving through workplace pensions continues to grow. We are pleased that the government took this matter up successfully with the European Commission and look forward to the Pensions Bill being amended to reflect those discussions.”
The Pensions Bill 2007 proposes automatic enrolment into a qualifying workplace scheme or personal accounts for all workers, aged between 22 and the State Pension age, and earning more £5,035 a year (at 2006/07 rates). Employees would contribute a minimum of four per cent, employers a minimum of three per cent, with around one per cent in tax relief from the government.
Date:19 May 2008
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