A private member’s bill proposing to extend auto-enrolment to workers younger than 22, the current minimum age for auto-enrolment, as well as those earning less than the current £10,000 minimum threshold, will be put forward in Parliament today, according to a report in The Times.
The proposals will draw upon the findings from a report published today by Onward, the think tank, which suggest the two measures could add £2.77 trillion to Britain’s retirement savings.
Commenting on the proposals, Becky O’Connor, Head of Pensions and Savings, interactive investor, 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.
“Equally, part time earners below the £10,000 threshold with an employer would benefit from being auto-enrolled, even though they may find it harder to manage the loss of income in the here and now, because otherwise they will be dependent on the state pension when they retire.
“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 than in it has been over the preceding few 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’. Step one is getting more people in on the pensions act, step two is making sure it delivers something worthwhile.
“In our paper ‘Is 12% the new 8%?’, published with LCP last year, we made the case for higher contributions in a ‘lower for longer’ growth world.”