New pension drive to encourage saving for retirement

Published on Tuesday 12 December 2006 11:52

THE Government today gave details of a new pension drive aimed at encouraging millions of workers to save for their retirement.

The scheme will automatically enrol workers without company schemes and for the first time would force their employers to contribute. But it immediately came under fire from the Tories and superannuation experts who warned some could see the value of their savings for retirement fall dramatically.

Work and Pensions Secretary John Hutton published a White Paper which he said would be "the catalyst for a new savings culture in our country". But pensions experts expressed fears that bosses would take the opportunity of the new programme which will kick in in 2012 to downgrade existing schemes to less generous provision.

From that date workers whose firms do not have occupational schemes will be enrolled in "personal accounts".

They will pay four per cent, employers three per cent and the government one per cent in tax relief.

Workers will have to positively opt out if they do not wish to join or they will be automatically enrolled into the scheme.

At the moment around seven million workers are not saving enough for their retirement or have no savings at all and Mr Hutton hopes that in total some ten million workers will benefit.

But the National Association of Pension Funds (NAPF) has warned that companies with more generous schemes could level down their contributions to the three per cent minimum.