By . Becky Barrow . PUBLISHED: . 18:34 EST, 1 October 2012 . | . UPDATED: . 19:02 EST, 1 October 2012 . The pensions revolution affecting up to 11million workers began yesterday. It is the biggest shake-up of pensions for more than a century and was hailed by ministers as ‘a truly radical social change’. For the first time, every boss will be forced to pay into a pension for their workers, who will be automatically signed up to the scheme. Pensions Minister Steve Webb, pictured, said the start of auto-enrolment, whereby for the first time every boss will be forced to pay into a pension for their workers, is a 'major milestone' Yesterday the first workers were ‘enrolled’ into the new pension schemes, with around 800,000 expected to be signed up before Christmas. Most workers aged between 22 and state pension age who are not members of a pension scheme will be signed up to a pension by their boss, known as automatic enrolment. Only the lowest earners, whose annual salary is £8,105 or less, will be exempted from the scheme. Workers who are auto-enrolled will join either a company scheme or the National Employment Savings Trust, known as NEST. At present, the majority of private sector workers do not put any money into a pension. If they do have a pension pot, it is worth an average of just £26,000. Under the new scheme, if a 30-year-old saved £50 a month, the pot would be worth around £90,000 at the age of 65, if the fund grew by 7 per cent a year. A £90,000 pension pot buys a 65-year-old man a pension of about £4,850 per year. A £26,000 pot buys an annual pension of about £1,500. The scheme was suggested by Lord Turner in 2005 when he was asked by the Labour government to try to solve Britain’s pensions crisis, but the launch has been a long time coming. Pensions Minister Steve Webb said yesterday that the start of auto-enrolment represents ‘a major milestone’ for workers as well as the Government’s attempt to solve the crisis. ‘Few policies affect as many people and this will be a truly radical social change,’ he said. Under the new scheme, if a 30-year-old saved £50 a month, the pot would be worth around £90,000 at the age of 65 . ‘I’m determined to make sure that pensions are no longer seen as the preserve of the few.’ He said it made a break from many other Government reforms which he described as ‘just awful and horrible’. Mr Webb hailed the shake-up as the biggest pensions revolution since state pensions were introduced by a 1908 Act of Parliament. The CBI, Britain’s biggest business lobby group, said it is the start of ‘a new dawn for pension savers’ which it said will ‘tackle the ticking retirement time bomb’. Workers will pay into their pension – but so will their boss and the Government will also make its own contribution through tax relief. Contributions will begin low but will rise to 4 per cent of salary from workers, 3 per cent from their boss and 1 per cent from tax relief in October 2018, making a total of 8 per cent of salary. Workers will have the right to opt out immediately if they do not want to save into a pension for whatever reason, but bosses have no right to encourage, or even force, them to opt out. The Government admits it expects around a third of workers will opt out, with many expected to say they simply cannot afford to save at the current time. Britain’s biggest companies will be the first to enrol their workers, a process which began yesterday, followed by smaller businesses over the next six years. In October, around 380,000 workers will be signed up, followed by a further 420,000 in November, and workers will continue to be signed up over the next few years. Between February and May next year, around 6.5million will be automatically enrolled. Nobody can escape, from Tesco having to enrol workers who are not currently in the supermarket’s pension scheme to a couple who employ a nanny to look after their young children. An advertising campaign featuring TV stars such as Theo Paphitis and Nick Hewer was launched recently to raise awareness of the shake-up. Stephen Gay, director of savings at the Association of British Insurers, said: ‘Automatic enrolment is an opportunity not to be missed. ‘It cannot be stressed enough how important it is to save for retirement. ‘The fact that we are living longer is great, but we can no longer have our heads in the sand about how we fund our income in retirement. ‘The state pension is a foundation, but most people need more and the earlier people start to save the easier they will find it to build enough savings for their later life.’ The shake-up comes after official figures showed the number of private sector workers with a company pension scheme has collapsed to its lowest level since records began in 1953. Of the country’s 23.9million private sector workers, only 2.9million are paying into a company pension scheme. At their peak in 1967, there were 8.1million members.
New scheme has been hailed by ministers as 'truly radical social change'
800,000 workers are expected to be signed up before Christmas .
By . Becky Barrow . PUBLISHED: . 18:34 EST, 1 October 2012 . | . UPDATED: . 19:02 EST, 1 October 2012 . The pensions revolution affecting up to 11million workers began yesterday. It is the biggest shake-up of pensions for more than a century and was hailed by ministers as ‘a truly radical social change’. For the first time, every boss will be forced to pay into a pension for their workers, who will be automatically signed up to the scheme. Pensions Minister Steve Webb, pictured, said the start of auto-enrolment, whereby for the first time every boss will be forced to pay into a pension for their workers, is a 'major milestone' Yesterday the first workers were ‘enrolled’ into the new pension schemes, with around 800,000 expected to be signed up before Christmas. Most workers aged between 22 and state pension age who are not members of a pension scheme will be signed up to a pension by their boss, known as automatic enrolment. Only the lowest earners, whose annual salary is £8,105 or less, will be exempted from the scheme. Workers who are auto-enrolled will join either a company scheme or the National Employment Savings Trust, known as NEST. At present, the majority of private sector workers do not put any money into a pension. If they do have a pension pot, it is worth an average of just £26,000. Under the new scheme, if a 30-year-old saved £50 a month, the pot would be worth around £90,000 at the age of 65, if the fund grew by 7 per cent a year. A £90,000 pension pot buys a 65-year-old man a pension of about £4,850 per year. A £26,000 pot buys an annual pension of about £1,500. The scheme was suggested by Lord Turner in 2005 when he was asked by the Labour government to try to solve Britain’s pensions crisis, but the launch has been a long time coming. Pensions Minister Steve Webb said yesterday that the start of auto-enrolment represents ‘a major milestone’ for workers as well as the Government’s attempt to solve the crisis. ‘Few policies affect as many people and this will be a truly radical social change,’ he said. Under the new scheme, if a 30-year-old saved £50 a month, the pot would be worth around £90,000 at the age of 65 . ‘I’m determined to make sure that pensions are no longer seen as the preserve of the few.’ He said it made a break from many other Government reforms which he described as ‘just awful and horrible’. Mr Webb hailed the shake-up as the biggest pensions revolution since state pensions were introduced by a 1908 Act of Parliament. The CBI, Britain’s biggest business lobby group, said it is the start of ‘a new dawn for pension savers’ which it said will ‘tackle the ticking retirement time bomb’. Workers will pay into their pension – but so will their boss and the Government will also make its own contribution through tax relief. Contributions will begin low but will rise to 4 per cent of salary from workers, 3 per cent from their boss and 1 per cent from tax relief in October 2018, making a total of 8 per cent of salary. Workers will have the right to opt out immediately if they do not want to save into a pension for whatever reason, but bosses have no right to encourage, or even force, them to opt out. The Government admits it expects around a third of workers will opt out, with many expected to say they simply cannot afford to save at the current time. Britain’s biggest companies will be the first to enrol their workers, a process which began yesterday, followed by smaller businesses over the next six years. In October, around 380,000 workers will be signed up, followed by a further 420,000 in November, and workers will continue to be signed up over the next few years. Between February and May next year, around 6.5million will be automatically enrolled. Nobody can escape, from Tesco having to enrol workers who are not currently in the supermarket’s pension scheme to a couple who employ a nanny to look after their young children. An advertising campaign featuring TV stars such as Theo Paphitis and Nick Hewer was launched recently to raise awareness of the shake-up. Stephen Gay, director of savings at the Association of British Insurers, said: ‘Automatic enrolment is an opportunity not to be missed. ‘It cannot be stressed enough how important it is to save for retirement. ‘The fact that we are living longer is great, but we can no longer have our heads in the sand about how we fund our income in retirement. ‘The state pension is a foundation, but most people need more and the earlier people start to save the easier they will find it to build enough savings for their later life.’ The shake-up comes after official figures showed the number of private sector workers with a company pension scheme has collapsed to its lowest level since records began in 1953. Of the country’s 23.9million private sector workers, only 2.9million are paying into a company pension scheme. At their peak in 1967, there were 8.1million members.
century and was hailed by ministers as ‘a truly schemes, with around 800,000 expected to be signed up before Christmas. Most workers aged this will be a truly radical social change,’ he