[UK] Pension rule changes would mean ‘£93,989 boost’ for minimum wage workers

[UK] Pension rule changes would mean ‘£93,989 boost’ for minimum wage workers
06 Jan 2022

On January 5, a bill proposing to extend auto-enrolment to workers younger than 22, as well as those earning less than the current £10,000 minimum threshold was expected to be put forward in Parliament, Express reports.

The changes it proposes could have a significant impact on the retirement savings of British workers. The proposals draw upon the findings from a report by the think-tank Onward, published yesterday, suggesting the proposed measures could increase Brits’ retirement savings by £2.77trillion.

Onward estimates that a full-time worker on the National Living Wage would gain an extra £93,989 over a working lifetime, as a result of such changes being made. A 60 per cent increase in their workplace pension savings.

North West Durham MP, Richard Holden was set to table the proposals to include more workers in auto-enrolment.

Mr Holden said, “Auto-enrolment has been one of the massive hidden triumphs of the last decade in the UK.

“But sadly millions of hard-working British people aren’t benefiting because they’re under 22 or simply not working enough hours. I want to change that."

At present, employees under the age of 22 or who earn less than £10,000 are not required to be auto-enrolled in a company pension scheme by their employer.

Becky O’Connor - Head of Pensions and Savings, interactive investor - says the current framework of auto-enrolment is out of date now that fewer people go to university and therefore start work at a younger age.

Ms O’Connor said, “Far too many people remain outside of the current workplace pension auto-enrolment guidelines and will face a hard retirement as a result.

“Many of these are low earners and women – people who auto-enrolment should be helping.

“The minimum age of 22 doesn’t work in a world where many young people choose not to go to university.

“There is no reason someone starting work at 18 shouldn’t be paying into a pension and every reason they should – the benefits of compound growth over the years for them are significant.”

Ms O’Connor said that lower earners could be forced to live solely on the state pension when they retire unless measures are introduced to help them build a pension pot.

She believes minimum contribution levels for workplace pension schemes should be increased to give Britons a better chance of saving enough for their retirement.

“Not only do lower and younger earners need to be brought into the private pensions system, minimum contribution levels should also rise to counteract the likelihood that investment growth from the stock market may be less buoyant over the coming decades.

“Being auto-enrolled at work doesn’t guarantee you a good retirement if that system is based on stock market returns that don’t deliver the expected amount.

“There are still big disparities in the retirement standards between those retiring on a defined contribution pension and those with far more generous, old-style defined benefit schemes.

"So not only does auto-enrolment need to be expanded to help those who are currently excluded, including the self-employed – the elephant in the room when it comes to pension provision - the contribution levels also need to be ‘levelled up’.”

Getting more workers involved in contributing to their pension savings and getting them involved earlier on could make a big difference to the overall health of Britain’s retirement landscape, and help ensure that pensioners can have the lifestyle they want when they are no longer working.

Ms O’Connor said, “Step one is getting more people in on the pensions act, step two is making sure it delivers something worthwhile.”


Source: Express

(Quotes via original reporting)

On January 5, a bill proposing to extend auto-enrolment to workers younger than 22, as well as those earning less than the current £10,000 minimum threshold was expected to be put forward in Parliament, Express reports.

The changes it proposes could have a significant impact on the retirement savings of British workers. The proposals draw upon the findings from a report by the think-tank Onward, published yesterday, suggesting the proposed measures could increase Brits’ retirement savings by £2.77trillion.

Onward estimates that a full-time worker on the National Living Wage would gain an extra £93,989 over a working lifetime, as a result of such changes being made. A 60 per cent increase in their workplace pension savings.

North West Durham MP, Richard Holden was set to table the proposals to include more workers in auto-enrolment.

Mr Holden said, “Auto-enrolment has been one of the massive hidden triumphs of the last decade in the UK.

“But sadly millions of hard-working British people aren’t benefiting because they’re under 22 or simply not working enough hours. I want to change that."

At present, employees under the age of 22 or who earn less than £10,000 are not required to be auto-enrolled in a company pension scheme by their employer.

Becky O’Connor - Head of Pensions and Savings, interactive investor - says the current framework of auto-enrolment is out of date now that fewer people go to university and therefore start work at a younger age.

Ms O’Connor said, “Far too many people remain outside of the current workplace pension auto-enrolment guidelines and will face a hard retirement as a result.

“Many of these are low earners and women – people who auto-enrolment should be helping.

“The minimum age of 22 doesn’t work in a world where many young people choose not to go to university.

“There is no reason someone starting work at 18 shouldn’t be paying into a pension and every reason they should – the benefits of compound growth over the years for them are significant.”

Ms O’Connor said that lower earners could be forced to live solely on the state pension when they retire unless measures are introduced to help them build a pension pot.

She believes minimum contribution levels for workplace pension schemes should be increased to give Britons a better chance of saving enough for their retirement.

“Not only do lower and younger earners need to be brought into the private pensions system, minimum contribution levels should also rise to counteract the likelihood that investment growth from the stock market may be less buoyant over the coming decades.

“Being auto-enrolled at work doesn’t guarantee you a good retirement if that system is based on stock market returns that don’t deliver the expected amount.

“There are still big disparities in the retirement standards between those retiring on a defined contribution pension and those with far more generous, old-style defined benefit schemes.

"So not only does auto-enrolment need to be expanded to help those who are currently excluded, including the self-employed – the elephant in the room when it comes to pension provision - the contribution levels also need to be ‘levelled up’.”

Getting more workers involved in contributing to their pension savings and getting them involved earlier on could make a big difference to the overall health of Britain’s retirement landscape, and help ensure that pensioners can have the lifestyle they want when they are no longer working.

Ms O’Connor said, “Step one is getting more people in on the pensions act, step two is making sure it delivers something worthwhile.”


Source: Express

(Quotes via original reporting)

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