Auto-enrolment alone 'won't be sufficient for retirement' Auto-enrolment pension savings will comprise 4% of salary from the employee, 3% from the employer and 1% in tax relief. Photograph: Peter Byrne/PA Auto-enrolment will not be enough to ensure the financial well-being of pensioners, the minister overseeing the changes has warned. Pensions minister Steve Webb said employees on average salaries will have to save more than the amounts contributed through auto-enrolment if they want to maintain their standard of living in retirement. Webb, who has pushed through the introduction of the scheme - a radical reform of workplace pensions that will see 11 million employees saving for their retirement for the first time - welcomed the phasing in of the scheme from 1 October. But he told the BBC's Today programme that the maximum contribution, equivalent to 8% of earnings, would not produce sufficient pension income to maintain an employee's standard of living in retirement, particularly those on higher salaries. The amounts that staff and their employers pay into pension schemes through auto-enrolment are to be increased gradually to prevent "contribution shock." But the current maximum amount, comprising 4% from the employee, 3% from the employer and 1% in tax relief, will only apply to "qualifying earnings" from £5,564 to £42,475 in the 2012/13 tax year. This means employees who get average salaries and above, particularly those who earn more than the upper band limit, will benefit from smaller contributions as a proportion of their salaries. "If you are on something like average earnings then the 8% we're talking about won't allow you to maintain your standard of living in retirement," Webb said. Low wage people, because they are already getting a state pension of say £7,000 a year, a bit of private pension saving on top actually gets them close to the standard of living they currently have. So it's the higher earners who probably ought to be going beyond the minimum. Ros Altmann, director general of Saga and a former pensions adviser to the previous government, has criticised the move to enrol people into pension schemes, where their money will be locked up until the age of 55. She argues it would be better for employees, particularly younger people, to save through schemes that allow them access to their money, such as Isas. Webb refuted this idea, pointing out that while short-term savings such as Isas have grown over recent years, "half the workforce" are building up "no pension except the state pension," so the government's first priority is "to get people saving at all." He added that contributing through auto-enrolment would enable employees to gain from money given by their employer and through tax relief - a benefit not available through Isas. Anyone aged 22 or over, earning more than £8,105 a year and in employment for three months or more, will be made a member of either their employer's existing occupational pension scheme or an alternative scheme chosen by their employer. This is being phased in over five years starting with the UK's biggest companies and culminating with those with just one or two members of staff. All eligible employees will be enrolled whether they want to take part or not. Those who then want to opt out must fill in a form within a month of enrolment to get their contribution money back. Webb said those who opt out will "be left in peace for three years" before being invited to join up again.