Secretary of state for work and pensions, John Hutton, said that this will be the best way to stop people from under-saving, particularly the low earners.
“We need to tackle the culture of under-saving, particularly among lower earners,” said the minister. “We believe the best way to get more people saving is to automatically enrol them into personal accounts.”
His announcement comes ahead of a radical shake up of the pensions system which should help more people be properly supplied for their pension.
Mr Hutton believes that through the automatic enrolment and getting lower charges, people should be able to keep a fifth more of their private savings.
Through these reforms, another £5 billion of savings are expected to be generated, which should hopefully help more people stay out of debt when they retire.