DEPARTMENT FOR WORK
AND PENSIONS News Release (PENS-027) issued by The Government News
Network on 14 June 2007
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
Website: http://www.dwp.gov.uk