Joining company pension to be made automatic

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New employees could be automatically enrolled in their company pension scheme and made to pay contributions unless they actively opt out, under proposals launched yesterday by the Government to tackle poor levels of saving.

Andrew Smith, the Secretary of State for Work and Pensions, outlined the options the Government was considering. These would mean that workers would have to make a decision to withdraw from their pension scheme to avoid saving. In schemes where the employer does not contribute, a default payment would be taken from staff unless they opted out. Automatic membership of company schemes could increase pension scheme take-up by 90 per cent, according to the CBI, which welcomed the proposals yesterday.

Susan Anderson, the director of human resources policy at the CBI, said: "There is a lot of evidence that automatic enrolment works. Employers offering generous occupational schemes have expressed frustration that employees do not take advantage of the benefits on offer."

There are some concerns, however, that some people would, through inertia, remain in pension schemes when they would be better off opting out. "Automatic enrolment may not be appropriate where employees are on low earnings or where staff turnover is high," Ms Anderson said.

Some called on the Government to do more to encourage employers to contribute to schemes, fearing that employees could be left facing compulsory contributions while their company paid nothing.

A TUC spokesman said yesterday: "Responsibility for decent pensions must be shared between employees and employers. The TUC would not support the proposal that employees alone should make compulsory contributions to schemes."

The DWP also unveiled plans to provide all pension savers with a regular "pension health check-up". Savers will be able to access an online retirement planner that will give them an overall picture of their retirement prospects, including state and private provision. The Government also plans to deliver pension forecasts that combine state and private pension savings by 2005.