Government proposals to increase the auto-enrolment threshold to £10,000 could put 1.8 million women at risk of missing out on a pension, the TUC has warned.

Under the auto-enrolment scheme, which will be phased in from October, private sector employers will automatically enrol workers between the age of 22 years and the state pension age, into an approved pension scheme.

Workers will contribute 5 per cent of their wages and employers will top this up with another 3 percent.

Only workers earning at least £7,475 a year will be included, but this threshold could now be increased in line with the income tax personal allowance which currently stands at £8,105, but could rise to £10,000.

As the majority of low-earners are female, the change would exclude 1.8 million women and 500,000 men from auto-enrolment, although they would still have the option of opting in to a pension scheme if they wished to.

TUC general secretary Brendan Barber said: “Whether this is the best way to help the low-paid is an interesting debate, but it would be disastrous if it had the unintended consequence of excluding a significant proportion of women workers from pensions saving”.

Meanwhile the government has announced plans to launch a consultation into private sector pensions later this year.

With the majority of final salary retirement schemes now closed to new members it wants to look into how workplace pensions can be “reinvigorated”.

The cost of final salary pension schemes has caused companies such as Shell and Unilever to move workers into defined contribution scheme, which provide a much less generous pension.

The consultation will aim to create a new type of pension scheme which will bridge the gap between the two options.

The proposed middle-ground scheme has been called “defined aspiration”.

Consumer goods manufacturer Unilever has been given the backing of its trustee board for proposed changes to its pension scheme.

The company’s employees are currently involved in strikes against the proposal to close its final salary pension scheme.

In a statement the trustees said: “Whilst the trustee board does not welcome the company’s decision to cease final salary accrual, it has concluded it should not oppose it.”

Unilever will now be able to go ahead with plans to move existing members of its final salary accrual scheme to a career average pension scheme.

Trustees have secured several improvements including better protection of accrued benefits for final salary scheme members moving to the Career average scheme.

Final salary scheme members will also be allowed to continue to build up defined benefits for future service for pensionable earnings up to approximately £48,000.

Members of Unilever’s career average pension will also benefit from the trustee’s recommendations, as increases to pensions in payment will be improved and a new voluntary contribution matching scheme will be introduced.

Earlier this week the Government announced controversial plans which could help to protect final salary schemes.

With just one in five final salary schemes still open to new member, pensions minister Steve Webb is considering whether the schemes’ inflation ‘link’ should be removed.

Final salary pensions are guaranteed to rise by the cost of living each year and removing this link to inflation would save companies around £7 billion and could help to save schemes at risk of closing.

However, it would also substantially cut payouts for the two million active savers in final salary schemes.

The cost of the inflation guarantee is growing rapidly because of increased life expectancy.

The Department for Work and Pensions said that the rule change is being considered but no decision has yet been made.

People who retire this year will be £3,000 worse off than those who retired four years ago because factors such as the credit crunch, the recession and the eurozone crisis have pushed down annuity rates to a record low.

Annuity rates fell by eight per cent in 2011, which was the fourth consecutive year of decline.

According to Prudential’s Class of 2012 study, the average retirement income has fallen to £15,500 a year, a decline of 16 per cent, or £3,100, since 2008 and more than £1,000 a year less than last year.

Even when private pensions, company pensions and the state pension are all taken into account, it is estimated that five million pensioners now have an income of £10,000 or less.

Fewer than two in five people expect to be financially comfortable in their retirement.

The Government’s quantitative easing programme, which was designed to boost the economy by using £75 billion of new electronically created money to purchase gilts, is believed to have been a major contributory factor to the fall in annuity rates which are based on gilt rates.

The quantitative easing programme pushed up the price of gilts but reduced the amount of annual income they pay out.

Prudential’s study suggests that pensioners in London will have the highest pension, of £17,900 a year, while people in Yorkshire and Humberside will have to survive on just £12,800.

Prudential spokesperson Vince Smith-Hughes commented that the current economic climate has created a “perfect storm” for people preparing to retire, with pensions falling while the cost of living rises.

Yesterday, the Pension Protection Fund reported that the combined deficit of private sector pension schemes in the UK increased to a record high last year.

At the end of December 2011 the collective deficit for the UK’s 6,500 private sector final salary schemes was £255.2 billion, compared with £222 billion in November.

An independent pensions consultant claims that the government’s proposed reforms to public sector pensions will result in no cost savings whatsoever.

John Ralfe says that the savings which will be made by increasing the public sector pension age to 67 will be cancelled out by the faster build up of pensions in the new schemes.

The Government has defended the effectiveness of the reforms, claiming that Mr Ralfe’s calculations are based on a partial analysis and do not take either higher pension contributions or reduced levels of inflation proofing into account.

As well as increasing the pension age, the Government plans to introduce career average schemes for most public sector employees, as these will be cheaper to fund.

It also plans to increase the amount that workers’ must contribute to their pension scheme.

The Government has already cut pension costs by changing the way public sector pensions are inflation-proofed.

They are now linked to the consumer prices index (CPI) rather than the retail prices index (RPI) because the CPI is designed to rise more slowly.

However, Mr Ralfe points out that improved accrual rates, introduced after recent negotiations with trade unions, will mean that the proposed pension deal will generate no savings compared with the existing arrangements.

Meanwhile, Unison has criticised the Government for focusing on public sector pensions instead of the crisis facing private sector pensions.

Dave Prentis, general secretary of Unison, said: ‘The real pensions timebomb is in the private sector.

‘Already two thirds of these workers get nothing from their employers towards their pensions – this could cost the taxpayer billions in the future.

‘The situation will spiral even further out of control, if more schemes are shut down and the taxpayer has to step in to cover the cost of supporting even more workers in their retirement.’

The private pension sector has suffered a ‘seismic collapse’ according to a survey by the Association of Consulting Actuaries (ACA).

The ACA revealed today that nine out of 10 private sector defined benefit schemes, which promise a pre-determined monthly benefit on retirement, have been closed to new entrants and four out of 10 are closed to future accrual.

In the current economic climate businesses are struggling to reduce costs and the survey found that a fifth of private sector employers are looking for ways to cut their pension spend.

The ACA’s 2011 pensions trends survey warns that the gap between private and public pensions is widening and the organisation is calling on the government to address the situation urgently.

While more than 5 million employees in the public sector can still join defined benefit pension schemes, fewer than 2 million private sector employees are now in these schemes, most of which are closed.

Stuart Southall, chairman of the ACA, said: “The government needs to be bold in helping private sector employers so they can consider new ways to boost pension savings over the mid- to longer-term and public sector pensions are not far better.”

From October, workers will be automatically enrolled into their employer’s qualifying pension scheme, as part of the Government’s strategy to ensure private sector workers have a work-place pension.

However, the introduction of auto-enrolment for smaller employers was recently delayed because of the deteriorating economic climate.

Businesses with fewer than 50 employees may now not have to comment auto-enrolment until after the start of the next parliament in 2015.

Mr Southall said that the delay in introducing auto-enrolment for smaller employers was ‘discouraging’.

Following the ACA’s report, leading economists have joined the call for the Government to take action over private sector pensions.

Professor Brian Morgan of Cardiff Metropolitan University warned of the growing gap between public and private sector pensions, and called for the Government to address the increasing threat of poverty in old age.

“It is vital that more incentives are provided to encourage people to invest more in their pensions and other forms of saving for their retirement,” Professor Morgan said.

“What is needed urgently is tax relief for both employers and employees in ways that ensure that the Government provides a ‘matching’ contribution that tops up the savings of employees,” he suggested.

Nearly a quarter (24 per cent) of private-sector final-salary pension schemes were closed in 2011, according to the National Association of Pension Funds (NAPF).

In comparison, just 3 per cent of final-salary pension schemes closed in 2008, while the proportion increased to 17 per cent in 2010.

It is estimated that the closure of this type of pension, which guarantees a payout based on earnings at the end of a career, has affected 250,000 employees in the past three years.

Many employers are moving staff over to defined contribution schemes, where payouts are based on contributions and returns on investment, placing the risk on employees rather than employers.

Only 19 per cent of private sector final-salary pension schemes are still open to employees according to the NAPF.

Joanne Segars, NAPF’s chief executive said: “The private sector is seeing a seismic shift in its pensions, and more change is certain. Final-salary deals are coming off the table and are either being watered-down or replaced altogether.

“Demographic and financial pressures mean businesses are struggling to afford these pensions,” she continued.

The NAPF is calling for the government to make it easier for companies to move their pension provision to a career average scheme.

This type of scheme calculates the member’s annual pension based on their average earnings over the total number of years they have been in the scheme.

Last week employees of consumer goods maker Unilever went on strike over the closure of their final salary pensions scheme.

It was the first time that Unilever employees in Britain had taken this type of industrial action.

Union members decided to go on strike after the company said in would no longer continue talks over the pension change, following an eight-month dispute.

Unilever plans to move its 5,000 members’ final salary pensions to a career average scheme by July 2012.

Employees who have been with a company for less than two years will no longer be eligible for a refund of the money they have paid into a defined-contribution pension scheme, under proposed reforms.

The change, which is designed to stop employees leaving a firm without a pension, has been welcomed by the National Association of Pension Funds.

The government is working to make it easier for people with a number of small pension pots to consolidate them into one worthwhile pension.

This will be particularly important when the auto-enrolment scheme starts to be introduced in October 2012.

The scheme will make it compulsory for private-sector employers to auto-enrol their employees into a pension fund and make contributions on their behalf.

It will be phased in, starting with firms with over 120,000 employees, and working down in order of size until September 2016 when all firms will be included.

The Government expects that a highly mobile jobs market and the introduction of automatic enrolment will lead to around 4.7 million additional small pension pots in its pensions system by 2050.

Pensions Minister Steve Webb said: “I am concerned that people are at risk of losing their small pension pots as they move from job to job.

“I do not want to see people who are doing the right thing by saving, ending up with very little for their retirement because the system is too complicated.

“I want to make it as easy as possible for people to grow big fat pension pots,” he said.

In related news, a survey by the CBI found that only 1 per cent of its members plan to reduce employee pension provision as a result of the introduction of auto-enrolment, while 61 per cent will enrol defined-contribution scheme members on their existing terms.

The survey also found that 80 per cent of employers have considered how they will comply with auto-enrolment regulations.

CBI chief policy director Katja Hall said: “Our survey shows a heartening level of readiness for next year’s pension reforms among firms facing the change, with less prepared firms typically those who will not be enrolling staff for several years to come.”

Private sector final-salary pension deficits have increased collectively by £63.5 billion, from £158.6 billion at the end of October to £222.1 billion at the end of November.

The figures, published by the Pension Protection Fund (PPF), reflect the increasing cost of paying for pensions which outstripped a 0.7 per cent month-on-month increase in the value of pension fund assets.

The cost of pensions is increasing due to poor returns on pension fund investments, particularly government bonds, or gilts as they are known.

When inflation is taken into account, the interest rates on UK government bonds are now negative.

The PPI reported that 5,390 defined benefit pension schemes, which promise to pay out a certain sum each year upon reaching retirement age, were in deficit, while just 1,143 schemes recorded a surplus.

In related news, new figures from This is Money and The Better Retirement Group show that pension payouts have fallen 10 per cent since summer.

This means that people retiring now will receive thousands of pounds a year less that those who retired just five months ago.

Just Retirement director, Steve Lowe, said this year represented ‘one of the lowest points’ in pensions history.

Annuity rates have fallen by 9.36 per cent over six months because they are closely linked to the yield on gilts, which offer relatively stable returns and carry a minimal risk of default.

However in the face of the eurozone crisis European and US investors have been turning to gilts, causing demand to soar.

Meanwhile the Bank of England has been buying gilts under its quantitative easing programme and therefore reducing supply.

These two factors have together substantially reduced gilts’ yields, effectively crippling the annuity market.

Anyone planning to purchase an annuity is advised to seek professional financial advice.

Putting off selecting an annuity can reduce the return on pensions savings according to Chatfield Private Client, a firm of Independent Financial Advisors.

The firm is calling for people to take annuities into account at an early stage of the process of taking out a pension.

Director at the firm Jason Ashman said: “What we are finding is that a lot of clients aren’t coming to advisers soon enough.

“It is no good actually thinking about retirement planning within six months of retirement.”

In order to achieve the best pensions returns, Mr Ashman suggests that people should consolidate savings into a good return package around five years before retirement.

In related news, a new ruling could help those with small pension pots as it will allow them to convert their holdings into cash lump sums.

From April, people aged over 60 whose pension rights total more than £18,000, including one or more pots worth less than £2,000, will be able to take the small personal pension holdings as cash.

Currently, only those who have less than £18,000 in total can take their small pension pots as a cash sum.

This means they have to purchase an annuity with each of the small funds, which may only generate an income of as little as £6 a month.

The ruling will enable people who have worked for several different employers and who therefore have a several small pension funds, to consolidate them, providing a bigger pot with which to buy an annuity and increasing the chance of securing a better rate.

Having just one pension, rather than several, also makes it easier to monitor performance.

However it may be best to seek professional advice before consolidating funds as exit and transfer penalties must be taken into account when calculating benefits.

The government has announced changes to its pensions offer for NHS staff, which it claims are an improvement designed to protect low-paid employees, but which unions claim is a tax on middle-earners.

Last week up to two million public sector workers went on strike over the government’s plan to increase the amount they will have to pay towards their pensions.

Workers would also have to retire late and move to a “career average” pension rather than a “final salary” scheme under the government’s proposals.

Keen to avoid a repetition of last week’s situation, when 400,000 NHS workers walked out leading to hospital operations being cancelled, the government hopes its ‘improved’ offer on NHS pensions will help bring an end to part of the wider public sector pensions dispute.

Under its latest offer 530,000 NHS staff earning between £15,000 and £26,557 would not have to pay higher pension contributions next year.

Under the previous offer, only workers earning less than £15,000 were protected from having to pay higher contributions.

However, under the latest offer, employees earning between £26,558 and £48,982 would be expected to contribute 8 per cent of their monthly salary next year, up from 6.5 per cent now.

Workers on salaries between £48,983 and £69,931 would have to contribute 8.9 per cent, while those earning between £69,932 and £110,273 would have to contribute 9.9 per cent.

Health Secretary Andrew Lansley said: “Having listened to staff and stakeholders, we have improved our proposals so that an extra 630,000 NHS staff will not pay any more into their pensions next year.”

Commenting on the latest offer, the Unite union’s assistant general secretary Gail Cartmail said: “The harsh reality of what the government is pushing is that middle earners will be the ones paying for these impositions.

“This is a tax on those workers, plain and simple,” she said.

Yesterday, the Chancellor George Osborne announced plans to end to national pay rates for teachers, nurses, prison officers and civil servants by April 2013, in order to tie public sector wages more closely to the cost of living.

This could mean a pay cut of up to 10 per cent for public sector workers in poorer parts of the country, where private sector staff are currently paid significantly less.

Figures from the Institute for Fiscal Studies suggest that the pay differential between the public and private sector could be 10 per cent in some parts of the country.