Ian Duncan SmithMore than half a million people will be newly saving into a workplace pension by Christmas due to a landmark initiative to automatically place employees into schemes, the Government has said.

The Department for Work and Pensions said that around 600,000 more people will be saving into a pension for the first time by the festive period, and by May 2015 some 4.3 million more people will be saving for their retirement.

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From October 1, the largest employers, with 120,000 or more workers, must place eligible workers into schemes, with firms gradually being enrolled in a staging process over the next six years.

The automatic enrolment scheme, which has been described as the biggest pensions shake-up in more than a century, aims to tackle concerns about a growing old age poverty crisis, as people are living for longer but failing to put away enough for their later years.

Iain Duncan Smith, Secretary of State for Work and Pensions, said: "Automatic enrolment will get up to nine million more people saving into a workplace pension and for many it will be the first time they have had the opportunity to save. It will allow people to start planning for their retirement and this will make it easier for them to start putting something aside, along with a contribution from their employer."

Figures released by the Office for National Statistics showed that the number of private sector workers paying into pension schemes has plummeted to its lowest level since records began in 1953. There were 2.9 million private sector workers placing money into schemes last year, marking the first time active membership has dipped below three million.

Steve Webb, Minister for Pensions, said: "Few policies affect as many people and this will be a truly radical social change. All the international evidence shows people respond positively to automatic enrolment, and I'm determined to make sure that pensions are no longer seen as the preserve of the few."

Some analysts have said the Government should go further in encouraging people to save, for example by making pensions more flexible so that workers can take some cash out if they need to or by increasing Isa allowances.

Saga director-general Ros Altmann said that people's confidence in pensions has been knocked by scandals, disappointments for people whose pensions have not turned out as they expected and low annuity rates which have "left many pensioners receiving much poorer value for their pension savings than ever before".

She described the UK's pension system as "the most complex in the world" and filled with jargon.