Economy

Pensions for teens: Government wants to extend auto-enrolment for young people

Pensions for teens: Government wants to extend auto-enrolment for young people

The government is lowering the age for auto-enrolment of workers into workplace pension schemes from 22 to 18-years-old, and changing the way pension contributions are calculated.

Work and Pensions Secretary David Gauke said there had been "greater saving for pensions" since automatic enrolment came into effect but admitted increases in contributions from next year "might put people off", even though "the evidence is that opt-out rates have been lower than people predicted".

These include removing the lower earnings limit, which is now £5,875, so individuals can put more of their salary into their pensions and earnings trigger which is £10,000.

There are about 5 million people now working in the gig economy, many of them will not be enroled in any workplace pension scheme as they are considered to self-employed.

It is estimated the move could introduce 900,000 young people into saving an additional £800m through a workplace pension.

For full help see our What is Pension Auto-Enrolment? guide.

"It is rather disappointing that the government does not seem willing to contemplate bringing in any of the changes until the mid-2020s".

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More than six million middle-class savers are failing to save enough for a comfortable retirement, the Government has admitted, as employers are scaling back the generous pension arrangements they once enjoyed. However, around 12 million people are judged to be under-saving for their retirement.

"Five years on, we want to build on this success to make sure that automatic enrolment is truly reflective of modern working practices and that everyone who could benefit from a workplace pension has the opportunity to do so".

Darren Philp, policy director at The People's Pension, welcomed the plans: "The earlier people start saving, the more investment growth can do the heavy lifting for them in saving for their retirement".

But former pensions minister Steve Webb, who is now director of policy at Royal London, a leading mutual life insurance and pensions company, said the government was acting far too slowly.

However, "the proposed pace of change is shockingly lethargic", he argued. "Talking about having reforms in place by the mid-2020s risks leaving a whole generation of workers behind".

"This pedestrian pace of reform risks creating a "lost generation" of people in their late forties and fifties who will simply be unable to afford to retire".


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