Department for Work and Pensions
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Millions more will be saving for the future as pensions act 2008 gets Royal assent
Up to 9 million people, many of them on low and middle incomes, will get access to a workplace pension, or will be able to save more, as the Pension Act 2008 received Royal Assent yesterday.
From 2012 workers will either be automatically enrolled into their employer's workplace pension scheme or entered into the new Personal Accounts scheme, ensuring those who in the past have not had the opportunity build up any savings for retirement can now do so. This landmark piece of legislation represents a key element of Lord Turner's Pension Commission's recommendations to help more people save for retirement.
Welcoming the passing of the Act, Secretary of State James Purnell said:
"This Act will fundamentally change the pensions' landscape for millions of people. It will no longer matter if you are in a low-paid job or you don't have a regular working pattern. If you are in some form of employment you will now have the chance to save for your retirement.
"As people are living longer and have higher expectations from their retirement, the need for us to take action was clear. Auto-enrolment and Personal Accounts deliver on the key recommendations from the Pensions Commission's report on helping millions of people to save for later life.
"Alongside the reforms made to the state system last year, we now have a pensions' settlement both in private and state that is fair, meeting the needs of people who in the past may have felt the system was not working for them."
Minister for Pensions and Ageing Society, Rosie Winterton said:
"It is estimated that there are around 7 million people in the UK who are not saving enough to generate the pension income they are likely to want, or expect, in retirement.
"But now, those who work for small employers, the local supermarket or pub for example, will get access to a workplace pension.
"With individuals' minimum contributions matched £1 for £1 under the new reforms by the employer and tax relief, plus years of investment growth, these measures provide a strong incentive to save.
"We have worked closely with all groups who have an interest in delivering a pensions system that is fair to all and can encourage saving. It is now up to all of us to help deliver on this new settlement."
Tim Jones, Chief Executive of the Personal Accounts Delivery Authority (PADA) said:
"The passing of the Pensions Bill into law enables PADA to get on with delivering the personal accounts scheme. That work now starts in earnest - we will, for example, start the procurement process for the core administration functions of the personal accounts scheme in January 2009. We are well placed to achieve our aim of helping millions save for their retirement and are ready for the challenges that lie ahead."
Pensions Regulator chief executive Tony Hobman said:
"We welcome the new objective given to us by the Act and will be working to maximise employers' compliance with their responsibilities. We have begun some of the early preparation of this work and will apply our risk-based approach, continuing to focus on educating and enabling with enforcement as a last resort."
The Bill also contains a number of significant measures to simplify and strengthen the existing pensions system. These include those to allow eligible people, particularly women, to buy additional National Insurance Contributions and measures to allow DWP data to be shared so that energy companies can identify people who may need assistance with their fuel bills.
Royal Assent was given this yesterday, 26th November 2008.
Notes to Editors
1. A fact sheet with key points relating to the Pensions Act is attached.
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Website: http://www.dwp.gov.uk
Royal Assent - Workplace Pension Reform - 14 Key Facts:
* The Pensions Act 2007 reformed State pensions and introduced arrangements to increase the State pension age. The Pensions Act 2008 reforms workplace pension provision.
* The aim of these reforms is to make saving for retirement the norm. There are currently around 7 million people in the UK who are not saving enough to generate the pension income they are likely to want, or expect, in retirement
* The workplace pension reforms are due to take effect from 2012 and will be introduced gradually to facilitate a smooth take-on of employers by the Pensions Regulator and pension schemes.
* The workplace pension reforms mean that all employers must offer a qualifying workplace pension scheme to their workers and that all eligible workers must be automatically enrolled into this chosen scheme.
* There will be minimum contribution levels - a worker's minimum contributions to their pension will be matched by minimum contributions from their employer and tax relief from the Government.
* Auto-enrolment is designed to make it easy for individuals to participate in pension saving, helping to overcome the inertia which prevents many people from saving currently. However, individuals will be able to opt out.
* The personal accounts scheme is being created to provide a low-cost, independent, workplace pension scheme that any employer can use. It aims to provide access to workplace pension saving to millions of people - typically those on low to middle incomes.
* Employers will be able to choose to use the personal accounts scheme or another qualifying workplace pension.
* 3 parties will work together to implement the new reforms - the Department for Work and Pensions (DWP), the Pensions Regulator (tPR), and the personal accounts delivery authority (PADA).
* DWP is responsible for co-ordinating activity for the reform programme, including agreeing policy with Ministers and overseeing delivery.
* The Pensions Regulator is the UK regulator of work-based pension schemes, and is an existing non-departmental public body.
* The role of the Pensions Regulator in these reforms is to maximise compliance with the employer duties set out in the Act, and ensure certain safeguards protecting employees are adhered to. It will provide information to employers on how to fulfil their duties and guidance on good standards of pension scheme administration.
* The personal accounts delivery authority is a new non-departmental public body specifically established under the Pensions Act 2007 to help implement the reforms.
* PADA will be responsible for designing and introducing the infrastructure for the new personal accounts pension scheme.
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