The Department of Work and Pensions (DWP) estimates that over half a million people will be saving into a workplace pension scheme by Christmas, owing to the start of auto-enrolment in just over a week's time.
In what it calls the 'biggest shake-up' to the UK pension landscape for over a century, the 1 October will see the largest employers required by law to automatically enrol all eligible workers into a work-place pension scheme.
Although employees are able to opt out, the Government hopes the lure of additional employer and Government contributions, depending on eligibility, will see around 600,000 more saving towards a pension by Christmas, with a further 4.3 million by May 2015.
Secretary of state for work and pensions, Iain Duncan Smith, said the reform was 'vital' as an ageing population and an increased cost of living means that up to 11 million people in the UK are not saving enough to see them through retirement.
Steve Webb, minister for pensions, said: "Few policies affect as many people and this will be a truly radical social change. All the international evidence shows people respond positively to automatic enrolment, and I'm determined to make sure that pensions are no longer seen as the preserve of the few."
According to the DWP, pension saving has fallen across all age groups but is worse among those aged between 22-29, falling from 43 per cent in 1997 to 24 per cent today. Compared to women, men have also tended to contribute much less towards a pension.
Under auto-enrolment, in which smaller businesses will gradually join until it will be compulsory for all firms from 1 January 2016, employers will eventually contribute 3 per cent of earnings, individuals 4 per cent and will receive a tax relief of 1 per cent.
Neil Carberry, director for employment for the Confederation of British Industry (CBI) commented: "Auto-enrolment will help rebuild a positive savings culture in the workplace and encourage people to take control of their retirement plans. It will help the country adapt to the happy challenge of rising lifespans gradually over time, and avoid a future pension funding crisis."
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