Every employee set to be put into pension scheme

COMPANIES will be forced to set up pension schemes – and staff will automatically be signed up – from next month.

Thornbury and Yate MP Steve Webb is leading what is billed as the biggest shake-up of the system for over 100 years.

Known as automatic enrolment, it means companies will all have to set up a workplace pension scheme. Staff who earn more than £8,000 a year will have to opt out if they do not want to contribute.

Mr Webb insisted businesses could cope with the extra cost and admin involved and said workers would have plenty of notice before pension contributions were taken out of their pay packet.

Bristol business chiefs said the timing of the announcement – with the economy in recession and employers looking to keep costs down – was not ideal, but said they accepted it needed to be done.

Yesterday Mr Webb told the Post: "Without this, millions of people will get a shock when they retire – in poverty, if we're not careful.

"They will either have to work much longer – because they won't be able to afford to retire – or they will have a big slump in their living standards. We know, human nature being what it is, people will put it off, they'll find it baffling or daunting – they just won't sort it out for themselves. We are taking all the hassle away."

The Lib Dem MP said tax breaks would be available for contributions to ease the burden on companies, and said the changes would create a "level playing field" because companies who had previously decided not to set up a scheme would no longer be at an advantage.

Automatic enrolment will begin with big companies like supermarkets, and Mr Webb said the smallest companies, likely to struggle most to meet the new rules, will not have to do anything until at least 2015.

In 1997, 576,000 people in the South West, 55 per cent of eligible workers, were making payments into a company pension scheme. But last year, this had plummeted to 471,000, 41 per cent. Mr Webb said the issue had been repeatedly delayed under previous governments and insisted it did not make sense to put if off any longer.

He added: "There's never been a great time to do these things. It's been talked about for years and years, and firms just want to get on with it."

Letters will be sent to staff, telling them they have been signed up to a company pension scheme, and explaining how they can opt straight back out.

Officials estimate that one in three will take up this option, but Mr Webb said there was no real way of knowing before the scheme had been launched.

Nigel Hutchings, of Business West, said his members were probably aware they needed to comply with the change, for both legal and moral reasons.

He added: "But it does represent, for some people I am sure, extra cost at a time when costs and income are all being very carefully looked at. I suspect the government would not have pressed ahead with this legislation had it known where we are.

"It's not something we can do much about – it's a worthy piece of legislation."

digital contact sheets