Automatic enrolment expansion could ‘boost’ pension savings by £2.8trn

Expanding automatic enrolment to young and low earners could boost pension savings by £2.8trn, according to a new report.

Conservative MP, Richard Holden, is expected to use a Private Members’ bill today to urge policymakers to lower the age at which workers are auto-enrolled into a pension from 22 to 18, as well as to scrap the £10,000 earnings threshold so that lower earners are included in the reforms.

A report published by think tank, Onward, has today suggested that these measures, combined with ditching the earnings band so every pound earned qualifies for a matched employer contribution, could boost pension savings by almost £2.8trn.

Investment platform, AJ Bell, has now suggested the government is facing “growing pressure” to expand its automatic enrolment reforms.

“Expanding automatic enrolment to younger workers and ditching both the earnings trigger and earnings bands would put rocket boosters under millions of employees’ pensions,” commented AJ Bell head of retirement policy, Tom Selby. “It would also bring millions more people into the pension system.

“A full-time worker on the national living wage could gain over £90,000 over their working lifetime under the plans, according to Onward, while younger workers could save an extra £20,000 for retirement on average.”

Selby added: “While these reforms might seem like a no-brainer from employees’ perspective, Prime Minister Boris Johnson and Chancellor Rishi Sunak will be conscious that expanding auto-enrolment will also come at a cost to businesses.

“Given the significant strain many firms have been under for the last two years as a result of COVID and the subsequent national lockdowns, laying extra pension costs at their doors now might risk subduing the UK’s economic recovery. Waiting a year or two so that, hopefully, the economy is a little less fragile may well be the preferred option.”

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