Millions more savers, billions more savings

Millions more people would benefit from a good workplace pension as a result of reforms in the Pensions Bill 2007, Secretary of State for Work and Pensions Peter Hain said today.

The Bill, introduced to Parliament today, would give all employees aged over 22, earning more than £5,000 a year, access to a good workplace pension with a minimum employer contribution for the first time.

Secretary of State for Work and Pensions, Peter Hain, said: "Automatic enrolment and the introduction of a compulsory employer contribution would be a huge social change - resulting in millions more savers, and billions of pounds more being saved towards retirement.

"It's good news that people are living longer, healthier lives - but unless people plan and save they could find themselves with less income in retirement than they'd want. Around 7m still aren't saving enough. These reforms will help people to meet their aspirations for later life.

"Between six and nine million people will be newly saving in a workplace pension or saving more as a result of these reforms. This will transform the savings culture in the UK - boosting overall annual pension contributions by up to around £10bn by 2015."

The Bill reforms build on the improvements to the State Pension System in the Pensions Act 2007. A simpler, more generous and more widely available State Pension will provide a solid foundation for people to plan and save for the future.

Thanks to the matching employer contribution and tax relief, at the default level someone contributing £1 of their take-home pay would get £2 going into their pension pot.

The Pensions Bill 2007 proposes:

Automatic enrolment into a qualifying workplace scheme from 2012.

The introduction of the new personal accounts scheme designed for those employers who do not currently run a pension scheme

Executive powers for the Personal Accounts Delivery Authority, allowing the authority to design this scheme at arm's length from Government.

A role for the Pensions Regulator as the compliance body for these reforms, ensuring employers meet their new obligations.

Further simplification to the Additional State Pension by consolidating the rights people have built up under Graduated Retirement Benefit, SERPs and State Second Pensions into a single cash sum.

Measures to ease the burden of regulation on employers, including a reduction in the cap on revaluation of deferred pensions from 5 per cent to 2.5 per cent - for future accruals only.

Commenting on the deregulatory measures, Minister for Pensions Reform Mike O'Brien said: "We want to encourage employers who provide Defined Benefit pension schemes while ensuring that members' benefits are protected.

"There is no magic bullet solution but we believe that the reduction of the revaluation cap achieves a balance, saving employers around £250m a year on average in the longer term and helping to keep defined benefit schemes open for the benefit of workers.
"I want to send a clear message to employers with good DB schemes - we want you to continue."