Extending auto enrolment to the under 22s will mean they can save nearly £50k more into a pension (Image: Getty)
Rachel Reeves has been urged to push forward pension reforms agreed by the previous government, which included lowering the minimum age and threshold for compulsory pension contributions.
Investment platform provider Tillit warned not doing so risked creating a “pensions timebomb”.
A bill to reduce the age for being automatically enrolled into a pension to 18 was passed by Parliament in September 2023.
The move was granted Royal Assent and was introduced as a private members bill in the House of Commons by Jonathan Gullis MP and taken through the House of Lords by
At the time the government claimed changes to , combined with the Mansion House Reforms announced by then Chancellor Jeremey Hunt in July, could see the average earner’s pension increase by nearly 50% if saving across their entire career, while a minimum wage earner could see their pension pot increase by over 85 %.
Current rules mean employers only have to set a pension up for an employee over the age of 22.
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The FT reported earlier this year that the plans were “stuck in limbo”, after the outgoing Tory government declined to set a timetable for the rollout of changes approved by MPs.
The extension of the auto enrolment programme to younger employers is expected to cost employers thousands of pounds per employee, although under current rules employers can offset their National Insurance bill by putting more money into their employee’s pension savings.
Standard Life estimates that someone who began working full-time with a salary of £25,000 per year and paid the current standard monthly auto-enrolment contributions of 5 per cent per employee, and 3 per cent from their employer from the age of 22, could amass a total retirement fund of £488,000 at the age of 68, not taking inflation into account.
If they had begun saving at 18 they could expect to increase that by at least another £46,000.
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Investment platform provider Tillit has called for the chancellor Rachel Reeves to raise minimum auto enrolment contributions as a matter of urgency.
Tillit was reported in Corporate Adviser as pointing out that over 80 per cent of households were falling short of a comfortable retirement. According to Tillit increasing contributions is essential to tackle this crisis.
Tillit founder and CEO, Felicia Hjertman says: “It’s deeply frustrating to see the Government’s continued inaction on raising the minimum level for employer pension contributions.
“Current contribution rates fall far short of what’s necessary to ensure a comfortable retirement, something which the government was warned about by the Pension Commission in the Lord Turner report over a decade ago.”