Under new pension rules, minimum wage workers will receive a ‘£93,989 boost.’
Changes to pension rules are expected to be proposed, potentially requiring more workers to enroll in auto-enrolment.
A bill extending auto-enrolment to workers under the age of 22 and earning less than the current £10,000 minimum wage is expected to be introduced in Parliament today.
Any changes could have a big impact on British workers’ retirement savings.
The proposals will be based on findings from a report released today by the think tank Onward, which estimates that the proposed measures could increase Britons’ retirement savings by £2.77 trillion.
According to Onward, a full-time worker on the National Living Wage would gain an extra £93,989 over their working lifetime as a result of the changes.
This would represent a 60 percent increase in their pension savings at work.
Richard Holden, MP for North West Durham, is set to introduce the proposals, which aim to expand auto-enrolment to more workers.
“Auto-enrolment has been one of the massive hidden triumphs of the last decade in the United Kingdom,” he said.
“However, millions of hardworking British people are missing out because they are under the age of 22 or simply do not work enough hours.”
That is something I want to change.”
Employees under the age of 22 or earning less than £10,000 are not currently required by their employer to be auto-enrolled in a company pension scheme.
Becky O’Connor, Interactive Investor’s Head of Pensions and Savings, believes that the current auto-enrolment framework is outdated because fewer people attend university and thus begin working at a younger age.
“Far too many people are still outside of the current workplace pension auto-enrolment guidelines, and as a result, they will have a difficult retirement,” she said.
“Many of these people are low-wage workers and women, whom auto-enrolment is supposed to assist.”
“In a world where many young people choose not to attend university, a minimum age of 22 does not make sense.”
“There is no reason why someone starting work at the age of 18 shouldn’t be contributing to a pension, and there are plenty of reasons why they should – the benefits of compound growth over time are significant.”
She also suggested that unless measures are put in place to assist low-income workers in building a pension pot, they may be forced to live solely on the state pension when they retire.
Ms. O’Connor believes that the minimum contribution levels for workplace pension schemes should be increased in order to give Britons a better chance of succeeding.
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