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UK Pensions Bill will Boost Retirement Savings for Millions

  • Published: 2011-01-18 : Author: Department for Work and Pensions
  • Synopsis: The UK Pensions Bill is the next step in helping millions save for their retirement in a workplace pension.

Main Document

The Pensions Bill, which is published today, is the next step in helping millions save for their retirement in a workplace pension.

At present employers do not have to contribute into a pension scheme for their employees and many choose not to. As a result, as a country we are under-saving for retirement.

Minister for Pensions Steve Webb said:

"This Bill will radically transform the pensions landscape in this country. Millions of people, who currently have little or nothing put by for their retirement will, from 2012, find themselves enrolled in a workplace pension - setting them on the road to a more secure future."

From 2012 employers will be required to automatically enroll eligible employees into a qualifying pension scheme. The measures included in the Bill will take forward the recommendations of the recent independent review of auto-enrollment to ensure that there is a balance between costs and benefits for individuals and a more proportionate impact on employers.

Middle earners after the reforms could be gaining well over the equivalent of a year's pay if they chose to save in a workplace pension. Based on employer contributions of 3 %, people earning an average income could gain an extra £650 a year - or around £30,000 over their working life by contributing to their pension.

Lord Freud said:

"We know that the younger people start to save, the better off they will be in retirement and that's why automatic enrollment will be so crucial. The measures in this Bill will provide a fair deal for workers in retirement, ease the burden on business and provide a sure foundation for pensions for generations to come."

The Pensions Bill will implement measures in the Making Automatic Enrollment Work review and the Command Paper 'A sustainable State Pension: when the State Pension age will increase to 66'. It builds on reforms set out in the Pensions Act 2008 and Pensions Act 2007.

The Pensions Bill will bring forward the rise in the State Pension age for men and women to 66 by 2020 so that the State Pension remains sustainable and fair for the future, given rising rates of longevity.

Some key measures in the Bill include:

Aligning the earnings threshold for automatic enrollment with the personal allowance for income tax

Introducing an optional waiting period of up to three months before employees need to be automatically enrolled

Simplifying the process for employers to certify their money purchase schemes meet requirements for automatic enrollment

Providing greater flexibility for employers regarding re-enrollment dates

Bringing forward the increase in State Pension age to 66 by 2020 and bringing women's State Pension age in line with men's to 65 by 2018

Allow contributions to be taken towards the cost of providing personal pension benefits to current judicial pensions scheme members

1. A copy of the Pensions Bill is available at:

2. Calculations on average earnings are based on an individual earning £28,600 per annum in 2010 earnings terms working from age 20 to 68 and contributing to a pension from age 22. Individual contributes at the default for auto-enrollment: 5% individual contributions (including tax relief) and 3% employer contributions. The statistics are from: Annual Survey of Hours and Earnings, Office for National Statistics.

3. A Written Ministerial Statement on the Making Automatic Enrollment Work Review is available at: 'Making Automatic Enrollment Work - A review for the Department for Work and Pensions', published 27 October is available at:

4. 'A sustainable State Pension: when the State Pension age will increase to 66', published 3 November 2010, is available at:

5. The Pensions Act 2008 introduced measures to encourage greater private saving which includes workplace pension reforms due to come into effect in 2012. These included new legal duties requiring employers to automatically enroll eligible jobholders into a qualifying pension scheme; a compliance regime enforced by the Pensions Regulator; and a new workplace pension scheme, the National Employment Savings Trust (NEST).

6. The Pensions Act 2007 introduced measures to make the State Pension fairer, more generous and more widely available. These included reducing the number of qualifying years needed to receive a full basic State Pension to 30 years for men and women; linking annual cost of living increases in basic State Pension to earnings rather than prices; introducing a new system of credits for parents and carers to build up their entitlement and gradually increasing State Pension age for men and women to 68 by 2046.


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