March 12 2014 Latest news:
Adam Aiken, Editor
Tuesday, May 1, 2012
A large majority of private-sector workers are unaware of the government’s plan to put people into pension schemes automatically – even though the new scheme will begin life in just a few months.
As well as the 70pc of employees who are in the dark, about 30pc of employers also claim to know nothing or little about the auto-enrolment scheme, according to a study of the issue called the Working Lives Report, commissioned by Aviva.
Under the scheme, which will start being rolled out later this year, up to 10 million people who are not already in workplace pensions will be put into schemes automatically unless they actively opt out.
It is all part of an effort to tackle the pensions time-bomb and to encourage people to save for their own retirement. It is widely recognised that ever-increasing life expectancy means the current pensions system is unsustainable in the long term.
The level of contributions under auto-enrolment will be increased gradually. By October 2018, minimum contributions worth 8pc of an employee’s earnings will be made into a savings pot, with workers paying 4pc, employers 3pc and the government 1pc.
Tom McPhail, head of pensions research, said the lack of engagement by employees was not particularly alarming.
“You would not necessarily expect employee awareness to be particularly high at this stage,” he said.
“The key test will be whether the pensions industry can rise to the challenge and deliver good workplace communication to employees; without this the whole project is likely to fall flat on its face.”
Graham Boffey, Aviva’s managing director of corporate benefits, said: “Britain’s employers are facing the significant challenge of transforming the way they provide pensions and workplace benefits at a time of continuing economic uncertainty.
“When the first companies start to automatically enrol their employees in October this year, we can’t expect an immediate step-change in how people save for their retirement – employers and the industry will need to make a long-term commitment to ensuring it’s a success.”
The Aviva study found that employees in the east of England are among the most likely to pay into workplace pensions, with nearly 40pc of them doing so.
However, more than a third of people work for employers who do not offer pension schemes; a quarter choose not to join their employers’ schemes; and a further 6pc of workers do not know what is on offer.
“Although those working in the private sector in the east of England may be among the most likely to pay into a workplace pension, the fact remains that almost two thirds do not,” said Mr Boffey.
“With the advent of auto-enrolment, more and more people will have the chance to save regularly for retirement, and we have to put focus on ensuring that employees have the support and guidance to make informed decisions about this.”