Pensions

Work and Pensions written question – answered on 5th March 2007.

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Photo of Philip Hammond Philip Hammond Shadow Secretary of State for Work and Pensions

To ask the Secretary of State for Work and Pensions if he will revise Figure 1(xiv) in the Pensions White Paper 'Security in Retirement: Towards a New Pension System' to show the cost of proposed reforms to employers if all employers currently offering schemes with an employer contribution worth at least 3 per cent. of banded earnings automatically enrol all staff aged 22 years or over with earnings of at least £5,000 a year on their existing schemes on existing terms.

Photo of James Purnell James Purnell Minister of State (Pensions Reform), Department for Work and Pensions

The following figures show the estimated costs to employers who contribute at least 3 per cent. of employees' salary if they were to automatically enrol all staff aged 22 years or over with earnings of at least £5,000 a year into their existing schemes on existing terms.

Most of these estimated costs would arise from the employer voluntarily offering a scheme with a contribution rate above the proposed minimum.

Costs of employer contribution at existing contribution rates ( million)
Firm-size £ million
1-4 100
5-49 200
50-249 300
250+ 1,200
Total 1,800
Notes:

1. These costs cannot be added to costs of the 3 per cent. minimum contribution presented in the White Paper because this would involve double counting

2. Cost to employers are based on estimates of their current contribution rates, not projected contribution rates in 2010.

3. Costs of minimum employer contribution (£ million) are rounded to the nearest £100 million, figures may not sum due to rounding.

4. Participation rates are identical to those used in of Figure l.xiv in the Pensions White Paper 'Security in retirement: Towards a New Pension System' and are based on our central estimate of opt out and around one third. We estimate that the range of opt-out rates will be between 20 per cent. and 50 per cent.

Source:

DWP modelling using Employers' Pension Provision Survey 2005, Family Resources Survey 2004-05, Annual Survey of Hours and Earnings 2004 and Small and Medium Sized Enterprise Statistics 2004

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