Industry and consumer groups have been lobbying the EU to make the allowance amid fears that employers would close existing schemes or level down contributions to the lower personal account rate, leaving staff significantly worse off in retirement.
Pensions reform minister Mike O’Brien says: “We have worked hard with industry representatives and the European Commission to ensure we get this right and we’re delighted with the outcome.
“Automatic enrolment is key to combating the inertia that prevents people from saving and I am pleased that millions of people who work for an employer who offers a workplace personal pension will be able to benefit from this important social reform.”
Association of British Insurers director general Stephen Haddrill says: “This is extremely good news. From the start of the debate, the ABI has consistently argued for this outcome to ensure that saving through workplace pensions continues to grow.”
Aegon head of pensions development Rachel Vahey says: “Denying contract-based schemes the ability to implement automatic enrolment could have forced their closure, leaving millions worse off in retirement.
“This would have been completely against the Government’s stated aim of protecting good existing schemes and targeting personal accounts at people without access to one.”
Standard Life head of pensions policy John Lawson says: “This is a sensible conclusion to a protracted negotiation. These directives were never intended to stop employees joining company schemes. Thousands of people would now be members of schemes if employers had been allowed to auto-enrol.
“I urge the Government to bring these new provisions into force at the earliest possible date.”