New boost for pension saving

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

The bill introduces powers to reduce the age for being automatically enrolled and enable pension saving from the first pound earned.

Since its introduction in 2012, automatic enrolment has transformed UK pension saving, with nearly 11 million people enrolled.

The new bill creates powers to scrap the lower earnings limit and reduce the age for automatic enrolment, which sees eligible employees made members of their workplace pension scheme without needing to ask.

The Department for Work and Pensions says the changes, combined with the Mansion House Reforms announced by the chancellor in July, could see the average earner’s pension increase by nearly 50 per cent if saving across their entire career.

And a minimum wage earner could see their pension pot grow by more than 85 per cent.

It believes the reforms will “unlock investment into pioneering UK businesses, grow the economy, and help the record number of people saving into a pension to achieve the retirement they want”.

Mel Stride, secretary of state for work and pensions, said: “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.”

Before the introduction of automatic enrolment in 2012, just 55 per cent of eligible employees saved into a workplace pension.

Official figures show that by 2021 this had risen to 88 per cent, with an additional £33 billion saved in real terms in 2021 compared to 2012.

The proportion of eligible women in a workplace pension has increased from 59 per cent in 2012 to 89 per cent in 2021, while the proportion of eligible 22 to 29-year-olds has more than doubled – from 35 per cent in 2012 to 86 per cent in 2021.

Chancellor Jeremy Hunt outlined reforms to boost pensions and increase investment in British businesses in July.

The ‘Mansion House Reforms’ could unlock an additional £75bn for high growth businesses, while reforms to defined contribution pension schemes will increase a typical earner’s pension pot by 12 per cent over the course of a career.

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