5 Feb 2009 12:00 PM
Pays to save - new report confirms benefits of saving

DEPARTMENT FOR WORK AND PENSIONS News Release (PENS-098) issued by COI News Distribution Service. 5 February 2009

Most people who save for their future can expect to benefit from saving under the Government's pension reform according to research published today by the Department for Work and Pensions.

The report, "Saving for Retirement: Implications of Pensions Reforms on Financial Incentives to Save for Retirement" shows that, given reasonable assumptions about the future, most people can expect to be better off in retirement by saving, with the majority getting back more than double what they save.

Minister for Pensions and the Ageing Society Rosie Winterton said;

"This report makes clear that most people can expect their savings to make them better off in retirement.

"Rather than putting your money under a mattress, sensible saving is about making your money work harder for you, whether it is in a pension or in other ways.

"Even after inflation, virtually everyone can expect to get back more than they put away.

"The research confirms that we are absolutely right in moving forward with the recommendations of the Turner Commission and the decision to introduce auto-enrollment in 2012."

The report looked at the impact on those making savings into a defined contribution pension after 2012 with an employer contribution. The results of the modelling were that:

* Over 70% of savers can expect to get back more than twice what they put in, even after taking inflation into account;

* For over 95% the expected improvement is greater than the cost of their contributions, even after taking inflation into account;

* There is no readily-identifiable group in the working age population whose members cannot, on average, expect to gain back more than they put in to a pension.

The report confirms the recommendations of the Turner Commission and the decision to introduce auto-enrolment in 2012, as part of the Government's pension reform. Although there are some risks inherent in saving, the report argues that the risk of under-saving and under-providing for retirement is far greater.

Auto-enrolment and Personal Accounts will mean that millions of people will benefit, many of whom will be getting access to an employer contribution for the first time. This key element of the Turner Commission formed the core of the 2008 Pension Act.

Notes to editors

1. The report, "Saving for Retirement: Implications of Pensions Reforms on Financial Incentives to Save for Retirement" is available on the DWP website at http://www.dwp.gov.uk/asd/asd5/report_abstracts/rr_abstracts/rra_558.asp

2. From 2012 employees will automatically be enrolled into their employer's pension scheme. For employees working for an employer that does not have an occupational scheme, they will be enrolled into a personal account. For more information on personal accounts visit the Personal Accounts Delivery Authority at http://www.padeliveryauthority.org.uk

DWP Press Office 0203 267 5144
Website http://www.dwp.gov.uk

NEWS RELEASE