AXA launches innovative Save More Tomorrow pension

As the number of people saving into a private pension scheme drops off and the credit crunch hits pension values, AXA is launching a new pension plan, Save More Tomorrow, that aims to address the growing problem of lack of pension provision faced by UK workers.

From this month AXA will be offering a new scheme that automatically increases the level of contributions over the duration of the pension. The scheme is the first of its kind in the UK but similar plans have become very popular in the US over the last few years.

Since 2004, the number of employees investing in a workplace pension has dropped by 1 million to its current level of 3.6 million. Currently around 12m workers in the UK are not saving enough for their retirement.

Studies show that 68% of workers feel they should be saving more but only 14% of them ever increase the amount they contribute during the period of the plan.

Save More Tomorrow is a company pension scheme and is available to employers of all sizes. It works through members gradually building up the level of pension contribution over a number of years which can be done to coincide with pay rises to lessen the impact.

AXA estimates that the average person will only have a pension worth £215 per week (at today's prices) at retirement, that's a drop of 53% for the median weekly wage.

Mark Rowlands, Head of Corporate Partnerships, AXA Corporate Benefits, said: "We have carried out extensive research around behavioural finance and were not surprised to find a lack of action and high levels of inertia when it came to planning and investing in a pension. This is backed up by a recent study commissioned by the FSA which concludes: ‘Most people do not act as fully rational individuals who choose in their self interest.'

"We hope that innovative schemes such as Save More Tomorrow will help people not only increase the amount they save but, by injecting a bit of innovation into the market, stop the slide in the number of people taking out a private pension.

"It would be good to see the introduction of a scheme such as this becoming a positive step towards averting the pension deficit that the UK is potentially facing."