One million workers in the United Kingdom now automatically have access to a company pension, according to the U.K. regulator of work-based pension plans, The Pensions Regulator.
Britain introduced automatic enrollment in October 2012 in an effort to address record-low national pension savings rates.
Official statistics dating from the spring of 2012 reveal that U.K. membership in workplace pension plans hit a 60-year low of 8.2 million, or 35%, primarily due to a decline in private sector pension plans. As a result, about 11 million Britons are not putting aside enough for retirement.
All of this is happening against the backdrop of increasing lifespans. In the past 25 years, life expectancy at age 65 has increased by five years for men and three years for women.
To address this trend, the biggest U.K. companies have already automatically enrolled their employees in pension plans. Medium-size businesses are starting now, and smaller firms will follow in the years to 2018. Under the new rules, employers will automatically enrol staff members who do not already participate in a qualifying plan.
In a year from now, thousands of British firms will be signing up their staff automatically, and by 2018, every employer in the country will have helped its workers start saving for their golden years, according to The Pensions Regulator.
This is “a real landmark” in a “quiet revolution,” says Minister for Pensions Steve Webb. “This is the biggest change to the pensions system for a century,” Webb explains. “The money workers save is being matched by contributions from their employers and topped up by tax relief, helping them put money aside for their retirement, many for the first time.”
The minimum contribution rates an employer must pay into their workers’ plans are being introduced gradually. The current minimum is a total contribution of 2%, with at least 1% provided by the employer. This will accumulate to a minimum contribution of 8% by October 2018, with a minimum employer contribution of 3%. But many employers and individuals can contribute more.
As the British population is aging, the country now has fewer people working for each retiree. In 1901, 10 individuals worked for every pensioner in the U.K., according to government figures. In 2010, this dropped down to just three employees for every retiree. By 2050, it is expected that it will further decline to just two workers for every pensioner.
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