Pensions auto-enrolment could almost double the private pension income of people starting work today, according to research published by the Department for Work and Pensions yesterday.
The Workplace pension reforms: baseline evaluation report concluded that, with auto-enrolment, median private pension income could rise to between £153 and £195 a week by 2070. Without employees being automatically signed up to a pension scheme by their employer it would only reach between £86 and £106.
Pensions minister Steve Webb said: 'This October we will introduce the most important changes in pensions for a century to help people save and avert a pensions crisis in the future.
'We are living longer, yet 11 million of us are not saving enough for retirement. Automatic enrolment will reverse this trend as millions will have a workplace pension and could double their private pension income, on top of a reformed state pension.'
The research also found that private sector pension participation fell from 7.9 million (55% of the workforce) in 2003 to 5.8 million (42%) in 2011. Low earners, individuals working for small and micro employers and those aged 22 to 29 showed particularly steep declines in pension participation.
Nearly three-quarters of large employers included in the research support auto-enrolment, while over 90% of employers who currently make contributions of 3% or more to employee pension pots would not reduce contribution levels for existing members as a result of an increase in contribution costs.
Among employees, the research found that 65% of individuals were expected to remain saving in a workplace pension when they were auto-enrolled. Among those who were undecided or could possibly opt out, less than one in ten (9%) said they would definitely opt out.
The DWP plans to update its research every year to track the impact of auto-enrolment.