Personal Accounts: DWP Executive Summary
Executive summary

Personal accounts: simplifying pensions, enabling choice

Our proposals

We estimate that around seven million people are currently undersaving for retirement. The Government is introducing radical reform to the private pensions system to help simplify pensions and overcome the obstacles to saving. Our main proposals are:

• all eligible employees will be automatically enrolled into either a personal account or an employer-sponsored scheme. Employees will contribute a minimum of 4 per cent, matched by a minimum 3 per cent employer contribution and around 1 per cent in the form of normal tax relief from the State. This will overcome the inertia and short-termism that characterise attitudes to saving;
• a new scheme of low cost personal accounts based on the approach outlined by the Pensions Commission. This approach will maximise coverage among our target group, minimising charges and delivery risk;
• a new national minimum employer contribution to improve incentives to save and increase pension participation;
• a simple choice for members, which we expect to include ethical and branded funds for those who want them, and a default fund for those who do not want to make a choice;
• an innovative approach to delivering the scheme using a delivery authority, staffed by individuals with expertise in business and financial services;
• a governance scheme with operational independence, whose duty to consult members and act in their interests will insulate it from external pressures;
• and a set of policies to ensure that personal accounts will complement, rather than compete with, existing high quality pension provision, including no transfers in and out of personal accounts and a maximum annual contribution of at least £5,000.