LONDON, Oct 2 – Britain’s biggest firms were from Monday required to pay into pension schemes aimed at benefiting millions of workers, as the government struggles to finance the cost of retirement.
“The biggest change in pensions for over a hundred years — automatic enrollment — starts today,” the Department for Work and Pensions said in a statement.
“Starting with the largest firms in October, employers will now be required by law to pay into a workplace pension for staff who do not opt out.”
Under the scheme, workers can choose to have part of their pay automatically placed in a private pension. The amount will be increased thanks to additional contributions made by the company and tax relief.
“We are proud to be introducing this truly historic change, which will radically alter the way we save for our old age, and see millions more people putting something aside for the future,” said Pensions Minister Steve Webb.
“We will start seeing large firms, such as banks and big supermarkets, automatically enrolling their staff into a workplace pension. Between now and 2018, more and more employers will come on stream — right down to the smallest ones.
“If we can get between six and nine million more people saving in a pension by the time all employers are in, that’s a genuine savings revolution.”
Employees opting into the scheme will be required to make minimum contributions totaling 1.0 percent of their salary, rising to 4.0 percent in 2018 — by which time employers will have to contribute the equivalent of 3.0 percent of a person’s salary.
Joanne Segars, chief executive of the National Association of Pension Funds (NAPF), welcomed the change.
“The UK is drifting towards an iceberg when it comes to paying for its old age, and we need radical reform like this,” she said.
The government last year unveiled plans to raise the public sector retirement age by six years to 66 and make them pay more towards their pensions, sparking outrage among workers like teachers and nurses.