Department for Work and Pensions
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Hutton announces details of landmark new pensions scheme
Plan announced as research shows support for tackling saving inertia
The Government today published details of a landmark new savings scheme to give all employees the right to a workplace pension with a contribution from their employer.
The Government's response to the Personal Accounts consultation was published as new research showed strong support for plans to tackle savings inertia by automatically enrolling employees into the new scheme.
The Attitudes to Pensions research report showed that 84 per cent of people surveyed supported the idea of a national pension savings scheme such as personal accounts, and 68 per cent supported automatic enrolment, particularly if there was an employer contribution.
But the report also showed that while most people recognise the importance of saving for their retirement, a third have never contributed to a private pension. And 29 per cent of people prioritise spending today over saving for tomorrow.
One in four of the people surveyed said they knew little or nothing about pensions, and this was one reason why people weren't putting money away for retirement.
Secretary of State for Work and Pensions John Hutton said: "The new pensions saving scheme we are setting out today will be a major step forward for employees across Britain and can kick-start a new culture of retirement saving.
"We know that people are far more likely to save for their retirement if they have access to a simple, low cost pension with a contribution from their employer. That is exactly what Personal Accounts will provide.
"The details of the new scheme we are setting out today can help people overcome the inertia that holds people back from saving while taking important steps to protect existing pension provision."
In its response to the White Paper consultation the Government announced that personal accounts would be run as an occupational pensions scheme managed by a board of trustees - placing the interests of members at its heart.
Trustees would be advised by a members' panel and an employers' panel - to ensure that the voices of both individuals saving in the scheme and contributing employers are heard.
There would be an annual contribution limit of £3,600 (in 2005 earnings terms). This will be uprated by earnings year on year.
Minister for Pension Reform James Purnell said: "We believe setting a cap at this level will allow Personal Accounts to remain focused on our target group of moderate to low earners who currently do not have access to a good pension.
"It is important that Personal Accounts complements rather than competes with existing high quality pension provision."
An estimated six to 10 million people would save in personal accounts from 2012. Personal accounts would have low charges enabling people to keep more of their savings.
The findings in Attitudes to Pensions are supported by separate qualitative research into the attitudes of 16 to 29 year olds, Live now, save later? Young people, saving and pensions. The report, also published today, demonstrates a strong sense of wanting to spend money to 'live for today'. But participants liked the 'hassle-free' nature of personal accounts and felt this would help to overcome inertia.
Notes to Editors:
1. Employees will see their savings in personal accounts matched £1 for £1 by a combination of contributions from their employer and the Government. The employee will put in a minimum of four per cent of their salary, the employer a minimum of three per cent and one per cent from the Government in tax relief. For the first time employees will have a guaranteed right to a contribution from their employer to boost the value of their pension pot.
2. The full consultation response can be read at http://www.dwp.gov.uk/pensionsreform/
3. The White Paper, Personal accounts: a new way to save, was published on December 12, 2006. It can be read at http://www.dwp.gov.uk/pensionsreform/new_way.asp
4. The report Attitudes to Pensions by Stephen McKay of the University of Birmingham and Elizabeth Clery, Miranda Phillips and Chloe Robinson of the National Centre for Social Research (NatCen) is available at http://www.dwp.gov.uk/asd/asd5/rrs-index.asp
5. The report Live now, save later? Young people, saving and pensions by Ipsos MORI's Social Research Institute is available at http://www.dwp.gov.uk/asd/asd5/rrs-index.asp