Rt Hon Alistair Darling MP

WEST EDINBURGH TIMES 60

February 2008

Radical government plans to improve pensions are making their way through the parliamentary process. The legislation will change the system, and help low and moderate earners in particular.

For the first time ever, employers will be required to make a minimum contribution to workers pensions of at least 3% of their pay. This 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.

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 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.

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 to around £10 billion by 2015.

I will keep you up to date with the progress of the Bill through Parliament.