Following the extension of auto-enrolment for workers aged 18 to 21, they will save an additional £105bn in pensions over 50 years, according to analysis from People’s Partnership.
Last year, auto-enrolment – which already seen nearly 11 billion people start saving into a pension since 2012 – has been extended to those aged 18 to 21.
Combined with the Mansion House reforms announced by the chancellor of the exchequer in July, the reforms are expected to see the average earner’s pension increase nearly 50% if saving across their entire career, while a minimum wage earner could see their pension pot increase by over 85%, according to Department for Work and Pensions (DWP).
The analysis by People’s Partnership found that additional contributions of over £400m per year for 18 to 21-year-olds will result in an additional £105bn of savings over the next 50 years, after all returns, fees and further contributions are factored in.
The bill is expected to be in force from mid-2020s and the People’s Partnership has called for cross-party agreement, with the support of key unions and trade bodies, on a timeline for implementing the reforms.
Phil Brown, director of policy at People’s Partnership, said: “The earlier you can save into a pension the better, as it means your money is invested for longer and has more time to benefit from growth in investment markets.
“So the government’s commitment to help younger workers start saving for their future is a huge step forward. But now we need to see promises turned into action, with a cross-party consensus on the timeline for delivering this change, given we have been waiting for this since 2017.”
He added that auto-enrolment was “undoubtedly” one of the most successful government policies in living memory, enabling millions of people to save tens of billions of pounds extra into their pension.
He continued: “It’s absolutely right that the policy continues to develop so that it reaches its full potential and enables as many people as possible to have the opportunity to benefit.”
Brown said that with nearly four in 10 people not saving enough for their retirement, the next big challenge for policymakers and the industry is reaching a consensus on how we solve the problem of under -saving.
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