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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

Workplace pension saving drops 15% in five years

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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10 comments so far. Why not have your say?

andrew sutherland

Jul 26, 2012 at 13:39

Maybe the Govt could also cut the tax that I'll have to pay when drawing on my pension in 30 odd years time, now that would be a huge boost and benefit to investing now.

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Johnwg

Jul 26, 2012 at 14:06

Webb should have thouight about that before his Governmant presdied over the "bashing" of pension annuities and savera rates generally!

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Trustim

Jul 26, 2012 at 14:42

As King Canute found out: this is no longer a tide - it is the sea itself. Business has no incentive and workers have no money - and none of us has any faith in the stability of Pension Schemes, the industry or the legislation.

Trust and stability are key!

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lionel davis

Jul 26, 2012 at 15:27

Mr Brown made the biggest contribution to a no growth pension portfollio when he taxed pension pots within companies to the tune of 5 billion a year, the present goverment has left the tax charge in place. When a goverment minister talks about private schemes when on a gold plated pension arrangement the joke is on all of us. Pensions must revert to tax free growth to help to give the investors confidence n investing in their future.

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dogdays

Jul 26, 2012 at 17:26

Put extra money into a fund that shows no profit, charges me money for the privalage, then takes the money and provides a peanuts annuity. In his dreams!!!!

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Moylando

Jul 26, 2012 at 17:37

All of the above ( Brown etc) may be true but the reality is that if people employed in the private sector don't save for their retirement they will be poor. Who can they expect to do it for them ? The taxpayer ? They're already sucked dry by public sector pensions - which will have to be revised if we have any hope to survive and keen sane.

Simple arithmetic and realism should go a long way to opening peoples eyes but the diversions of the current blame game and media mush have made many people unable to think for themselves.

- and blaming poor interest rates for not saving is a mad way of thinking

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dd

Jul 26, 2012 at 20:03

"...taxed pension pots within companies to the tune of 5 billion a year, the present government has left the tax charge in place.... "

Exactly, Lionel. Imagine all the unproductive work which could have been avoided if GB's actions had simply been reversed. The problem though, is that the financial situation is so dire that the current government dare not reverse it.

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Michael Stevens

Jul 26, 2012 at 21:24

Do these figures take into account the number of Group Stakeholder/ Personal Pension Plans that employers pay in to.Many thousands with millions of employees.

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Anonymous 1 needed this 'off the record'

Jul 27, 2012 at 15:57

No longer mandatory to join a company pension.

RPI link to State Pensions broken and then reinstated

Graduated pension reduced to triviality

SERPS introduced and then reduced to triviality

S2P - as above

PPP's to grow tax free - then taxed

Take benefits from 50 then 55 then.....

State pension age raised and will go on rising

QE destroying annuity rates and making huge black holes in final salary schemes.

Stakeholder pensions

Pension Simplification! Ha!

The trouble with pensions is that the politicians just can't stop dabbling with them. Do you honestly think auto-enrolment/NEST will be any different?

Some future Chancellor will see trillions of £££ sitting in pension funds and say "I'll have some of that" just like Gordon Brown did.

Pensions: Constantly moving and Constantly changing.

Auto Enrolment: You will be automatically enrolled into something which will change with each government, on which you may or may not get tax relief at a rate which will change. The fund may grow in a tax free/efficient/taxed environment. You may be able to take an amount as cash at retirement date which cannot be specified because the goal posts are on wheels, and which may or may not be taxed, and then you will be forced to purchase a gender neutral EU-annuity which WILL be taxed at source and will be based on derisory annuity rates.

These things are going to fly off the shelves!

EMPLOYERS: Make sure you have plenty of opt out forms ready.

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Tortoise

Sep 22, 2012 at 16:28

The government should look to itself before moaning about this. Start taxing pensions as a return of your own money rather than new income. Treat pension annuities the same as purchased life annuities, get rid of the 55% estate duty tax and stop linking draw down rates to government bonds via the GAD rate.

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