400,000 Scots now have pension thanks to auto-enrolment

More than 400,000 people in Scotland now save into a workplace pension through the UK Government's auto-enrolment scheme.

The system started being phased in five years ago, with the aim of encouraging more people to save towards retirement.

Many workers previously missed out on valuable pension benefits because their employer didn’t offer them a pension, or they didn’t apply to join their company’s pension scheme.

But auto-enrolment makes it compulsory for employers to automatically enrol their eligible workers into a pension scheme. The employer must also pay money into the scheme. 

Benefits

Auto-enrolment is in the process of being phased in until February next year. If your employer decides to pay only the minimum amount, the contribution from them starts at 1% of qualifying earnings and rises to 3% in 2019.

The employee starts paying 0.8% of qualifying earnings, rising to 4% in 2019. There is also Government tax relief starting at 0.2%  and rising to 1% in 2019.

UK Minister for Pensions Richard Harrington said: "For most of us, if we want to continue to do the things we enjoy in retirement, a workplace or personal pension is something we'll need.

"That's why I am particularly pleased to see 400,000 people in Scotland saving for their retirement thanks to automatic enrolment.

"When it comes to saving, my advice is start off small and build it up - even if you can only afford to put a bit in at first it can all add up over time.

"This year many more small employers will see their workplace pensions duties start and my message to them is clear: don't be daunted, there is help and support out there."

Concerns

However, firms do have concerns.

Colin Borland, head of devolved nations at the Federation of Small Businesses, said the rising employer contributions have to be found from somewhere.

He added: "If you have a dozen staff or so, then it's significant. But I think the impact goes beyond simple cost. When we asked them, three in four of our businesses said auto-enrolment put an awful lot of pressure - in fact too much pressure - on businesses like theirs."

The UK Government is currently carrying out a review into automatic enrolment, which will consider its success to date, and explore ways that the policy can be further developed.

Through auto-enrolment, by the end of 2016 almost seven million people had been enrolled into a pension scheme by nearly 300,000 employers.

This is expected to lead to around 10million people newly-saving or saving more by 2018, generating around £17billion a year more in workplace pension saving by 2019-20.

Auto-enrolment experts

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