The Pensions Bill 2007 has been introduced to parliament.
The Bill, which will reduce legislation for employers providing pension schemes, proposes automatic enrolment for staff into a qualifying workplace pension scheme from 2012 and the introduction of personal accounts for employers who do not currently run a pension scheme. Under the proposals, all employees aged over 22 years, who earn more than £5,000 a year will be automatically enrolled into either a qualifying workplace pensions scheme or personal accounts.
Peter Hain, secretary of state for work and pensions, said: “Automatic enrolment and the introduction of a compulsory employer contribution would be a huge social change – resulting in millions more savers, and billions of pounds more being saved towards retirement.”
The Bill also proposes to give executive powers to the Personal Accounts Delivery Authority, which will allow it to devise the scheme at arm’s length from the government.
Means-tested benefits, however, remain a point of contention around the introduction of personal accounts, amid fears that people who opt out of personal accounts could be worse off as a result. Liberal Democrat shadow work and pensions secretary, Danny Alexander MP, welcomed personal accounts but said the scheme is undermined by Prime Minister Gordon Brown’s means-tested state pension which could remove the gains from saving for many.
“People with very low incomes, broken work records, or massive credit card debts need to be able to get independent advice about whether saving is worthwhile. If these problems are not addressed, a good idea will be seriously undermined,” he said.
The Bill also proposes means of easing the burden of regulation placed on employers, through measures such as reducing the cap on the revaluation of deferred pensions for future accruals only from 5% to 2.5%.