Automatic enrolment - why it's a good idea.

On Monday automatic enrolment will start to be phased in. In case you've missed the adverts or you're not employed by a large company (the phase in will start with the biggest companies first), it will mean that millions of employees will be automatically enrolled into their workplace pension, without them doing anything. But no-one will be forced to stay in if they don't want to - you're free to opt out if you want to. You'll have to pay in 4% of your salary, your employer will pay 3% and the government will provide 1% in the form of tax relief (contributions are also being phased in so you won't pay this much to start and you can pay more if you want to). Now, I don't think automatic enrolment is the perfect solution and I think the pensions industry has some real improvements to make in terms of what it offers, how it talks to its customers and how much it charges (particularly on old-style pensions, which people may have taken out years ago). However, there's no getting away from the fact that the state pension simply isn't enough for most people to live on. It's currently £107.45 a week for the full basic state pension (less than £20 a day). You can retire on more if you earn a higher state pension through SERPS and/or the State Second Pension (S2P), but many people, especially women, don't. There's a lot of research to back up the fact that while some people genuinely can't afford to save into a pension, many don't do it because they don't get round to it. Morrisons, one of the biggest supermarkets, says that 90% of its workers aren't in its pension scheme. And that figure is not uncommon. Another major high street retailer found a massive difference in the percentage of (mainly female) workers signing up to its pension scheme, depending on the store they worked in. In some, over 80% of employees were in the pension scheme, in others, the figure was as low as 20%. There was no difference in the salaries earned, and not much difference in the age and income of the workforce in the various stores. What it came down to was how enthusiastic the local manager was for the pension scheme. If he or she joined it and said it was a good idea, others would and vice versa. Automatic enrolment isn't the answer to the pensions crisis. We need the government to make sure it's always worth saving and not to shift the goalposts, and we need a pensions industry that always puts its customers first. But automatic enrolment is a step in the right direction. And it's quite a big step.