PM backs plans for a low cost pensions scheme

The Prime Minister has backed plans for a low cost pensions scheme aimed at encouraging millions of workers to save for their retirement in his monthly press conference.

Speaking in Downing Street, ahead of a formal announcement by Work and Pensions Secretary John Hutton of a White Paper, the PM gave his backing to the new "personal accounts'' which are due to take effect from 2012.

Under the plan, employees will be auto-enrolled into the scheme - although they will be able to opt out - and will contribute four per cent of their earnings, which will be topped up by employer contributions of three per cent and tax relief of one per cent.

The Government hopes that up to 10 million workers will benefit from the plan, paying in annual contributions of around £8 billion. Over the long term the personal accounts are expected to account for £100 - £200 billion in funds under management.

Currently it is estimated that about seven million employees are not saving enough for their retirement or have no savings at all.

The new pensions system will not be a Government run scheme - the Government will set the framework, and establish a Delivery Authority which will initially advise and then manage delivery of personal through the private sector.

By 10 Downing Street