Workers must get saving

16 August 2013
Workers must get saving

Hospitality is among the worst-performing sectors in terms of saving for pensions. But it's time everyone started putting away some funds for tomorrow, says pensions minister Steve Webb

People often see saving for a pension as something they can put off until tomorrow. But leave it too late, and you won't have built up very much to live on by the time you retire.

That is why we have introduced the biggest change to the pensions system in a century, 
giving up to 11 million people a helping hand. 
A new duty was introduced in October, requiring employers to automatically enrol their staff into a workplace pension scheme.

By 2018, this will cover every workplace - from the largest to the very smallest. It applies to all employees aged between 22 and the state pension age who are earning more than £9,440 a year.

However, anyone can opt in and it's not always necessary to wait until your employer enrols you. Hospitality workers can enrol straight away if their company already has a suitable scheme.

For employers, the important message is to start preparing now. It is a legal duty to enrol eligible workers, so check the date for compliance for your size of company at the Pensions Regulator (TPR) website (

Employers with 2,000 staff or more are now enrolling their employees. If you have fewer than 50 workers, you won't be staging until June 2015 at the earliest, but the rule of thumb is to allow 18 months to prepare.

Employers should also choose a provider that is right for them. The National Employment Savings Trust (NEST) has been established as a low-cost, low-hassle option. But TPR can help answer any questions you have before you decide, and you may choose one of the many other providers in the market.

We have set contributions low to encourage as many people to stay in and start saving. Initially, employees contribute 1% of their gross monthly salary, and this rises to 5% by 2018. That is matched by 1% from their employer, rising to 3%, which makes a minimum total contribution of 8%.

We recognise there are some costs involved in setting up a workplace pension scheme. But we have done much to ease the burden on employers, including staggering staging dates and an optional postponement period of up to three months before a worker needs to be automatically enrolled.

This will save businesses about £170m a year in contribution costs.

Offering a workplace pension can also enhance your reputation as an employer, and could provide an ideal opportunity to review the existing benefits you offer employees. Some employers have already seen this as a chance to help them attract and retain high-quality employees by contributing more than the statutory minimum.

From posters and your intranet to letters and text messages, we have found employers can make a real difference by communicating with their workers about the pension changes. There is material to support them with this on the TPR website.

It is important to make sure workers know that money is also being paid in by their employer which boosts their own savings.

A million people have already been automatically enrolled into a workplace pension, and we are seeing stunningly high participation rates among some of the biggest employers.

Starting a pension can be a life-changing event, and as millions more people see the benefits, employers can rightly be proud of the contribution they will make.

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