Rt Hon Alistair Darling MP
Gorgie Dalry Gazette - Alistair Darling MP
11 January 2008
Government plans to improve pensions is on the parliamentary agenda this month as radical legislation to change the system, and help particularly low and moderate earners, goes through the parliamentary process.
Employers will, for the first time ever, be required to make a minimum contribution to workers pensions and as a result of all the changes between six and nine million people will be newly saving in a workplace pension or saving more in their present pension.
The Pensions Bill, taken together with the changes to the State Pension we enacted last year, when it reaches the statute book later this year will represent the biggest change in pensions since the state pension was introduced last century, and I cannot exaggerate its importance.
The ‘pensions problem’ arises mainly because, for various reasons, around seven million people are not saving enough for retirement: only half of those aged over 35 are saving for a pension, and only a sixth of 20-24 year olds. Unimaginable as it may seem when you are young old age creeps up on us all, and I cannot advise strongly enough that preparations for our advancing years must be started as early as possible.
Under-saving is particularly serious for those on moderate to low earnings with only 40% of those earning between £5000 to £35,000 a year saving towards a pension compared to 75% earning over £35,000.
It is this under-saving the Pensions Bill is trying mainly to address. It will ensure that all eligible workers are automatically enrolled into a qualifying workplace pension, with a right to opt out if they choose.
The obligation on employers to make a minimum contribution of at least three per cent of workers’ pay to their pensions will boost the pensions of more than one million workers who are already saving, and between six and nine million people will be newly saving in a workplace pensions or saving more as a result.
And for those without access to a good quality workplace pension scheme, the Bill will establish a new low-cost system of personal accounts, ensuring that everyone has access to a workplace pension. This will particularly benefit low to moderate earners.
The new pensions’ legislation will transform the savings culture in the UK as the overall annual pension contributions will go up around £10 billion by 2015.
I hope it is not too late to wish you all a Happy new Year.
