In the near future, the decision to save into a pension for retirement is being taken out of many people’s hands.

In a little less than a year’s time on October 1, 2012, employees are going to be automatically enrolled into their pension scheme with a minimum contribution deducted from earnings.

Employers with over 120,000 UK employees will be the first to auto enrol their employees into the scheme. From August 14, 2014 employers with less than 50 employees will have to start this process depending on their PAYE reference numbers.

Employers with employees between these figures will have a ‘staging date’ between these dates. A full list of staging dates is available on The Pensions Regulator’s website.

The scheme will apply to people who are aged between 22 and state pension age and earn over £7,475 a year. These employees will be automatically enrolled three months after starting employment.

Employees can choose to opt out. However every three years the employer has to enrol these employees again and the employee will have to opt out of the scheme again if they want out.

Employees who do not fit into age and earning requirements can choose to join their employer’s scheme if they wish. Minimum contributions will be phased in over a five-year period. From October 2012, the minimum total contribution is two per cent, with a minimum one per cent from the employer.

In October 2016 the total minimum is raised to five per cent, with a minimum two per cent employer contribution. Then from October 2017 onwards, the minimum total contribution will be eight per cent, with a minimum employer contribution of three per cent.

The minimum contribution includes tax relief on employee contributions and will be based on ‘band earnings’ between £5,035 and £33,540, to be reviewed in January.

For someone aged 30 who earns £26,000 a year, just above the national average earnings the minimum one per cent contribution would be £13.98 net per month, a three per cent contribution would be £41.93 net per month and the five per cent contribution from October 2017 will be £69.88 per month.

If a person aged 30 earning this amount started a pension plan immediately with his contribution at five per cent and three per cent from his employer, his pension fund could be £201,000 at the age of 65 assuming the fund grows by seven per cent a year.

However this does not take into account that his or her salary will increase over the years and inflation will decrease the buying power of the fund in 25 years time.