All companies to offer workplace pensions

The new rules, which will lead to up to eight million people saving into a pension for the first time, will apply to every firm, regardless of how many workers it employs.

But companies will be able to wait for three months before staff are enrolled into a pension scheme, to reduce costs for firms that employ large numbers of temporary workers.

The amount people have to be earning before they are automatically enrolled has also been increased from £5,035 under the previous government's proposals to £7,475, in line with the level at which income tax is paid.

Other measures to help companies manage the changes include simplifying the process for firms to show that their pension schemes meet the minimum standards required and further measures to reduce the red tape surrounding pension schemes.

The previous government set out plans for all workers to be automatically enrolled into a company pension scheme from October 2012, although they will retain the right to opt out.

Individuals will have to contribute 4% of their pay to the schemes, with companies paying in 3% and the Government topping this up with 1%.

Today's announcement follows an independent review on auto-enrolment, which was launched by the new Government in June.

It had considered exempting firms that employ four or fewer people from the new requirements, but has decided that the rules will apply to all.

Nest pensions

Companies that do not offer their own pension scheme will be able to enrol their workers into the National Employment Savings Trust (Nest), a scheme set up by the Government.

Pensions Minister Steve Webb says: "Our reforms will ensure that millions of people will start to save for their retirement, many for the first time.

"I welcome the sensible and balanced proposals from the independent review team, which will help ensure automatic enrolment works."

But critics of the scheme have warned it could hit the competitiveness of small businesses, while there are also fears that it will lead to a "levelling down" of company pension schemes in line with the minimum contribution levels required.

Auto-enrolment will be gradually introduced between October 2012 and September 2016, starting with large employers, followed by medium ones and finally small businesses and companies set up after April 2012, although firms can bring it in sooner if they wish.

Contribution levels will also be built up gradually, and will initially be set at a minimum of 2%, of which 1% will come from the employer, rising to a total of 5% by September 2017, 2% of which will be paid by companies, and increasing to the full 8% by October of that year.

Staff who want to join their company scheme before the three-month waiting period is up will be able to do so.

Further reading/Key links

Boost pension: State Pension Pension MoneySaving: Pensions