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2 December 2004 - Reforms so employers can promote pensions at work

Reforms have been announced today so companies can encourage workers to join good pension schemes. Changes to the Financial Service and Market Act (FSMA) will now make it far easier for employers to promote their own workplace pensions to employees.

There are around 3 million people seriously under-saving for their retirement, and yet there are an estimated 4.6 million employees with access to an employer-based scheme that have not joined it. So encouraging take-up of what exists already is a crucial dimension of the overall pensions challenge.

Employers running schemes often feel unable to actively encourage workers to join up. Now, employers who make a contribution to stakeholder or group personal pensions will be free to promote these schemes to their staff.

It comes on top of other reforms to encourage workers being offered pensions to take them up. The government is already taking forward steps to ensure more people receive clear pension forecasts and it is evaluating the effectiveness of scheme joining techniques, including automatic enrolment.

Welcoming the change, Secretary of State, Alan Johnson, said:

"The key to getting people to save is for individuals to understand the options available to them. This change enables employers to inform staff about the positive contribution to the overall package that a company pension contribution provides.

"These are significant reforms. 4.6 million employees with access to an employer-based scheme have not joined up and where an employer makes a contribution to a scheme, these individuals are missing out on a substantial benefit. Employers need to get the message out: deciding not to join such a scheme is like turning down a pay rise.

“The Pensions Act will ensure people are able to get information about the pensions opportunities available to them, and we are now freeing employers so that they can play their crucial role.”

Sir Peter Davis, Chairman of the Employer Task Force on pensions, said:

"I very much welcome today's announcement and am delighted that the Government has listened to employers. The current rules are cited by many employers and providers as a barrier to greater pension provision and increased take up. It is important the new rules are implemented quickly and are straightforward for employers to interpret."

The Treasury announced that as part of their FSMA Two-year review employers who contribute to their employees pension and do not receive a direct commercial benefit from promoting their pension would be exempt from the Financial Promotions Order from Spring 2005.

Notes for editors

  1. The Treasury announced the results of their review of the Financial Services and Markets Act 2000 today.
  2. The review announced that as part of their FSMA Two-year review employers who contribute to their employee pension and do not receive a direct commercial benefit from promoting their pension would be exempt from the Financial Promotions Order from Spring 2005.
  3. The Government consulted with a number of key stakeholders including the Employers Task Force and the CBI.
  4. Informed Choice makes up part of the Pensions Act which was granted Royal Assent on November 18th 2004.
  5. On February 3rd 2004 the Department for Work and Pensions published 'Simplicity, Security and Choice: Informed choices for working and saving' which detailed the Informed Choice agenda can be found at:
  6. The Employer Task Force on pensions was set up in summer 2003 and is due to report to Alan Johnson, Secretary of State for DWP, by the end of this year on employer led solutions to strengthening pension provision.

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