Government reveals pension income under personal accounts

The Government believes almost two thirds of people who are not currently saving for their retirement but will be automatically enrolled into a workplace pension scheme from 2012 are earning below £20,000.

Nearly 20% are earning below £10,000.

The Government also outlined the additional retirement income they expect people to receive by saving in personal accounts. The figures show a 52 year old earning £11,500 who saves 8% of band earnings from 2012 until retirement will receive an additional income of £7 per week (in today's earnings terms). This additional pension income increases their net total income in retirement by around 4.5% from what they would have received by not saving.

A 42 year old who earns £22,500 would get an extra £33 per week by saving 8% of band earnings from 2012 until age 68, a 20% increase in their net total income.

Andrew Tully, Senior Pensions Policy Manager at Standard Life said: 'These findings indicate that means-tested benefits are necessary to keep older savers above the poverty line. However, if means-tested benefits are promised to younger savers who will be automatically enrolled in a pension scheme from 2012, many will choose to opt-out. The Government should start to scale back means-tested benefits from 2012 as these workers will be entitled to an employer pension contribution that the previous generation weren't.'