Automatic enrolment onto a pension scheme begins today for many employees.
This radical reform of UK pensions will mean that many are contributing to private pension schemes for the first time. The hope is that this will ensure low and middle earners begin to save a pensions pot in addition to state provision.
Auto-enrolment relies on the theory of inertia – i.e., people will take the option that involves least hassle. The system is designed to be as simple for employees as possible – employers automatically choose a pensions scheme for them and contribute to it – although they employees choose to opt out, this is more trouble, particularly as they will have to opt out every year.
Many campaigners in the pensions and insurance industry approve of the policy. Stephen Gay, of the Association of British Insurers, has said:
‘It cannot be stressed enough how important it is to save for retirement… automatic enrolment will help workers start a savings habit that will stay with them for a lifetime.’
Only the largest employers will adopt the scheme today – the system will be gradually rolled out, with the smallest companies not having to participate until June 2015.