Retirement income of today's workers could double thanks to automatic enrolment, Government claims

Research (114-page / 2.6MB PDF) by the Department for Work and Pensions (DWP) shows that, as a result of the programme, the average worker's private pension income could rise to between £153 and £195 a week by 2070. Without the reforms, the average will only reach between £86 and £106.

The report, which tracks trends and describes the current pensions landscape, will be updated every year to track the impact of the reforms, the Government said.

The largest employers will have to start auto-enrolling workers into a suitable workplace pension scheme, or the National Employment Savings Trust (NEST), into a suitable pension scheme from 1 October. Smaller employers will follow in a staggered implementation programme: all existing companies will have to have enrolled their staff by April 2017 while new employers will have until February 2018. Companies will be required to automatically enrol 'eligible jobholders' aged between 22 and the State Pension age who are earning more than £7,475 a year.

Pension contributions by both employers and employees will also be phased in, rising to a minimum total contribution of 8% of earnings by October 2018 in addition to a Government contribution in the form of tax relief. Of this, a minimum of 3% must be contributed by the employer.

Although just under a quarter of private sector organisations - particularly the larger employers - offer some work of workplace pension, according to Government figures, only 10% of employers provide an "open" scheme to which the employer makes a contribution.

Pensions minister Steve Webb described the reforms as "the most important changes in pensions for a century", which would help avert a future "pensions crisis" and result in up to eight million more people saving for retirement.

"We are living longer yet 11 million of us are not saving enough for retirement," he said. "Automatic enrolment will reverse this trend as millions will have a workplace pension and could double their private pension income, on top of a reformed state pension."

Pensions law expert Simon Tyler of Pinsent Masons, the law firm behind Out-Law.com, said that the main test of automatic enrolment's success would be the extent to which workers opted out of pension saving. All eligible workers will be able to opt out of an automatic scheme should they choose too; however they will be re-enrolled every three years.

"The Government is predicting that only 35% of auto-enrolled workers will opt out," Tyler said. "It's still early days in knowing whether auto-enrolment will be a resounding success; however it will be if these predictions are realised. If the 35% opt-out figure proves correct, auto-enrolment will go a long way to improving pensions saving."

The DWP's research shows that private sector workplace pension saving has fallen from £39.3 billion in 2007 to £35bn in 2011 with low earners, individuals working for small and micro employers and younger workers, aged between 22 and 29, showing the steepest declines in pension participation. Private sector pension participation overall has fallen from 55% of the workforce, or 7.9 million people, in 2003 to 42% of the workforce, or 5.8 million people, in 2011.

Although acknowledging the "degree of uncertainty" surrounding potential opt-out levels, the DWP pointed to a survey of saver attitudes carried out in 2009 as evidence that 65% of automatically enrolled individuals would remain in pension saving. Only 9% of the remainder said that they would "definitely" opt out, according to the figures, with more than half of those saving they were likely to opt out citing affordability as the reason.