BUSINESS lobbies, unions, and pension funds have backed pensions minister Steve Webb’s auto-enrolment scheme, as it is rolled out this morning.
From today, firms with more than 120,000 employees must enrol all staff in a pension scheme, and by 2018 all employees earning enough to pay national insurance will have to be put in a plan.
To begin with, employees must contribute one per cent of their total earnings above the tax-free allowance of £8,105, with their employer matching this – by 2018 workers must put in four per cent and firms three per cent. A further percentage point contribution will come from government tax relief.
The Confederation of British Industry said the policy could prevent a future pensions crisis. “Boosting pension saving is essential to caring for our ageing population and increasing investment in our economy,” said director-general John Cridland.
The Trades Union Congress agreed, hoping the policy could reverse a “decades-long decline in pension provision.”
The National Association of Pension Funds (NAPF) also cheered the scheme: “The UK is drifting towards an iceberg when it comes to paying for old age – we need radical reform like this,” said NAPF boss Joanne Segars.
PENSIONS: NEED TO KNOW
■ From today, companies must begin automatically enrolling their employees into a pension scheme
■ Initially, this just applies to the so-called big four supermarkets: Asda, Tesco, Sainsbury’s, and Morrison’s – since they are the only firms with over 120,000 employees
■ By the end of this year, businesses employing over 50,000 must enrol staff
■ By 1 April 2017, even households and firms with just one employee will be liable
■ RBS already enrolled its staff in July, and some 40 per cent opted out – but those enrolled had already opted out of the company’s own scheme
■ To begin with, the minimum contribution is one per cent of wages from the employee, matched by one per cent from the employer
■ Eventually employees will have to pay four per cent, employers three per cent, and the government one per cent through tax relief
■ Firms can put pension pots in any scheme that qualifies with these levels of contributions
■ Employees can opt out by requesting a form from their employer – but staff can’t get out of paying October’s contribution, they will have to claim it back