UK insurers the European Commission (EC), the executive branch of
the European Union (EU), has approved the British government’s plan
to permit automatic enrolment of workers into insurance-based
workplace personal pension (WPP) as part of pension reforms due for
implementation in 2012.
The EC’s approval followed an approach from the UK’s Department
for Work and Pensions in which it requested clarity on whether the
automatic enrolment into a contract-based WPP scheme was compatible
with the EU’s Distance Marketing Directive and the Unfair
Commercial Practices Directive.
Following the EC’s approval the UK government is to proceed with an
amendment to the Pensions Bill 2007 to allow automatic enrolment
WPPs. The bill already allows for automatic enrolment into
trust-based pension schemes.
The Pensions Bill 2007 proposes automatic enrolment into a
qualifying pension scheme for all workers, aged between 22 and
state pension age, earning more £5,035 a year at 2006/07 rates.
Workers would contribute a minimum of 4 percent of their incomes,
employers a minimum of three per cent and government about 1
percent in the form of tax relief.
In a statement the UK Secretary of State James Purnell noted that
at present about 3 million employees are enrolled in WPP’s via
which they save £6.7 billion ($13 billion) annually. However, there
are a further 4.7 million people who work for a company with a WPP
scheme and are not members.