• February 29, 2024
 Pension saving boost for millions receives Royal Assent

Pension saving boost for millions receives Royal Assent

A Private Members’ Bill to help millions save more into their pension and start saving sooner has cleared Parliament and been granted Royal Assent.

Millions of people, including low earners and younger workers, will be helped to save more into their pension and look after their financial futures as a Private Members’ Bill completed its passage through Parliament and received Royal Assent.

The Bill, introduced in the House of Commons by Jonathan Gullis MP and taken through the House of Lords by Baroness Altmann, creates powers to scrap the lower earnings limit and reduce the age for Automatic Enrolment, the landmark pensions policy which sees eligible employees made members of their workplace pension scheme without needing to ask.

The changes to Automatic Enrolment, combined with the Mansion House Reforms announced by the Chancellor 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%.

Secretary of State for Work and Pensions Mel Stride said:

“Thanks to Automatic Enrolment, we are empowering a record number of British workers to invest in their financial futures – with an additional £33 billion saved in 2021 compared to 2012.

This Bill will mean millions across the country can save more and save earlier – boosting security in older age and helping people achieve the retirements they’ve worked so hard for.”

Automatic Enrolment has particularly benefitted women, young people and lower earners – once poorly served or excluded from workplace pensions. The proportion of eligible women in a workplace pension has increased from 59% in 2012 to 89% in 2021, while the proportion of eligible 22 to 29-year-olds has more than doubled – from 35% in 2012 to 86% in 2021.

Lowering the age at which eligible workers must be automatically enrolled into a pension scheme by their employers from 22 to 18 will make saving the norm for young adults and enable them to begin to save from the start of their working lives.

Commenting on the news, Katharine Photiou, Managing Director of Workplace Savings at Legal & General said that is is “fantastic to see this Bill receive Royal Assent”. She added:

“The changes, that we fully support and have previously called for, will boost the number of people enrolled into a workplace pension and the amount they save for retirement. The lowering of the pensions auto-enrolment age from 22 to 18 and the scrapping of the lower earnings limit will see people benefitting earlier and from the very first pound that they earn.

Looking at the impact of these changes on retirement pots, we have mapped out what the eventual pension pot size would be at retirement for 18-year-olds coming into the workforce under the new reforms, compared to those that were auto-enrolled at the age of 22 under the current legislation. If the changes were to be implemented tomorrow, the average man saving into a pension now would have an additional £430,694 in their pension pot once they reach 65, a 47% increase in the value of their pot. Whilst a woman would see their pension pot grow more significantly but from a much lower starting point: an 87% increase, which amounts to an additional £378,997 in pension savings by the age of 65.”

The Department for Work and Pensions (DWP) will launch a consultation on implementing the new measures.

Katie Johnson, Digital Journalist, Today's Media

Digital Journalist, Today's Media Contact: katie.johnson@todaysmedia.co.uk LinkedIn