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24 Sep 2012

More than half a million Britons to join workplace pension by year-end

Over half a million employees in the UK will become members of a workplace pension scheme by the end of the year as a result of automatic enrolment, data from the Department for Work and Pensions (DWP) showed last week.

According to the latest figures, there will be around 600,000 new savers in workplace pensions by the end of 2012 after auto-enrolment is launched in October for the biggest employers. About 4.3 million more people will have joined a workplace pension by May 2015.

Up to 11 million employees are expected to be eligible for the reforms, with between six and nine million saving for the first time or saving more in various workplace pension schemes. Minister for Pensions Steve Webb described auto-enrolment as the biggest boost to UK pensions for more than a hundred years.

Under auto-enrolment, the contribution from employers will eventually reach 3% of earnings, individuals will contribute 4% of earnings and tax relief of 1% will bring the total contribution to 8%. Workers can choose to opt out of the reforms, without receiving the extra contribution or the tax relief. Re-enrolment will take place every three years, with opting out still being kept as an option.

The reforms come as pension saving in the UK has declined across all age groups, with the sharpest fall registered among those aged 22-29, to 24% currently from 43% in 1997. The statistics show that pension saving has dropped for both men and women, but men have seen a steeper decline - to 44% from 59% previously. For women, saving has declined to 39% from 49%.

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