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Workplace pension saving drops 15% in five years
Pensions minister Steve Webb plans to stop the decrease in workplace saving with the introduction of auto-enrolment in October.
by Michelle McGagh on Jul 26, 2012 at 12:46
Just over a quarter of private sector employees are currently contributing to a workplace pension, representing a 15% drop in pension saving in the UK in just five years.
Figures from the Department for Work and Pensions (DWP) show that 26% of private sector employees save into a company pension scheme, down from 3% in 2007.
The fall in individual savings could be down to fewer companies in the private sector offering employees a chance to save. Just 31% of companies offer pension provision, down from 41% in 2007.
Pensions minister Steve Webb said the government’s auto-enrolment initiative would help to boost workplace saving in the UK. From October all employees who do not contribute to a workplace pension with be automatically enrolled into the scheme. Although employees will be able to opt out of the scheme, they will be auto-enrolled every three years and will have to continue to opt out if they do not want to contribute.
Webb said 45% of firms that do not offer a workplace intend to enrol their employees into the National Employment Savings Trust (Nest), the government-backed pension scheme.
A further 11% of companies will set up their own scheme, and 5% said they will use a combination of both their own scheme and Nest.
Webb said: ‘Automatic enrolment into workplace pensions will start the monumental shift we need to get millions more people in Britain saving for their retirement.
‘It’s a major change for business too, especially for firms that don’t currently offer pension schemes for staff and it is good news that so many say they will use Nest.’
Joanne Segars, chief executive of the National Association of Pension Funds, warned that by failing to save workers were building up a problem for the future.
‘These figures paint an alarmingly bleak picture and far too few workers in the private sector are saving into a pension. The risk is that they will spend their old age struggling to get by on the state pension alone.
‘The weak economy is putting a lot of pressure on households and people are prioritising the short-term over the long-term. Sadly many see pensions as a luxury rather than a necessity.’
She added that auto-enrolment would be a ‘big help’ to kick-starting saving in the UK but ‘more needs to be done if the UK is to pay for its old age’.
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