Government to unveil pension plan details

LONDON, Dec 12 (Reuters) The government will unveil far-reaching pension proposals today that could see workers enrolled automatically into schemes as part of a plan to plug the nation's estimated 57 billion pounds savings gap.

Under the proposals, workers from 2012 who are not signed up for a company pension will be enrolled in the National Pension Savings Scheme (NPSS) unless they specifically ask not to join.

Employees would contribute four percent of their gross salary to the scheme and employers would have to add three percent, with a further 1 percent derived from tax relief.

''The big problem is that not enough people are saving for their retirement and the reason they are not saving is that up to nine million people are working in companies that do not offer an occupational pension,'' said Work and Pensions Secretary John Hutton.

''Even when a company does offer a scheme, many workers choose not to enrol,'' he told BBC radio.

The proposals for automatic enrolment were prompted by the Pensions Commission which argues that Britain needs a low-cost system to boost meagre savings levels and cope with the rising cost of a greying population.

The Commission, chaired by Adair Turner, said in a November 2005 report that such a plan could use existing tax-collection systems to channel money from employees and firms to a suite of large funds offering exposure to bonds, equities, cash and other assets.

Criticism of the proposals centre around the fear the scheme could encourage firms that do offer pensions to their staff to cut their existing contributions to the minimum level set by the NPSS.

Some small businesses have also said their commercial viability could be compromised if they are forced to pay into pension schemes for their staff.

A number of industry experts have also wondered how easy it will be for people to take existing pension pots with them if they change jobs.

It could also be uneconomic for the NPSS to handle transfers to and from other pension plans, because legislators plan to run the NPSS for an annual management charge as low as 0.3 per cent -- much less than current industry levels.

Reuters SHB VV1506