The government is proposing changes to the pensions system which would make occupational pensions compulsory.

In a bid to tackle the pensions crisis, employees would automatically become members of a workplace scheme when they join the company and would have to specify if they want to opt out.

The plan is a complete reversal of the current system. At present, new employees have to sign a form committing them to the company pension, but under the new scheme they would have to tick a box if they did not want to become members.

Other government proposals a web-based retirement planning service, showing employees how much they should be saving for old age, and statements from employers illustrating how much an employee’s pension is worth when combined with the State benefit and, if applicable, their private pension.

Work and Pensions Secretary Andrew Smith will set out the proposals as the government comes under growing pressure to tackle the massive pensions black hole, currently estimated to be at least £27 billion.

Many companies have closed their final-salary schemes in recent years, favouring riskier plans which depend on the stock market.

The proposal for compulsory workplace pensions – based on the US model – will be introduced as a series of pilot schemes before being taken up nationwide.

The government is also considering introducing graduated contributions, a common policy in the United States, by which workers’ contributions increase as they get older and their salaries increase.
Other measures will be set out in the Pensions Bill later this month.

The National Association of Pension Funds welcomed the changes. The association’s communications director, Andy Fleming, said: “More people save if they are automatically entered into the pension scheme. If this measure helps to boost membership of workplace pensions then we are all for it.”