Government to force 18-year-olds to set aside cash for retirement under new pension plan drive
At least 900,000 more young staff will be forced to join a pension plan from the day they start work under a savings drive being unveiled this week
TEENAGE workers will be forced to join a pension scheme at 18 under a savings drive being unveiled this week.
At least 900,000 more young staff will put money aside for retirement from the day they start work.
Automatic enrolment to an annuity plan is being extended to 18-year-olds in the latest stage of a Government initiative.
So far it has led to nine million employees putting aside part of their wages for old age.
Current rules for joining a scheme apply only to those between 22 and the state pension age — and those earning above a certain trigger.
But the Department For Work and Pensions is recommending the starting age be lowered to 18 — and that workers begin contributing at a much lower income level.
DWP Secretary David Gauke claims the Government’s new savings culture will put millions on the path to a more financially secure retirement.
He said: “We’re committed to enabling more people to save while they’re working so that they can enjoy greater financial security when they retire.”
Currently employers must match the contribution of workers who put a penny of every pound they earn into a pension fund. From next April this rises to 2p for firms and 3p for staff.
'Young people deserve chance to build up a good retirement income'
For many of us saving for the future is probably on the ‘to do’ list, writes David Gauke:
And with a New Year approaching, the idea of putting a bit of extra money aside or getting on top of your finances after Christmas spending will be on many of our minds.
Some of us will include thinking about our pension savings on this list. But the reality is, when you’re in your 20s, 30s and like me your 40s, retirement can seem like a very long way off.
We have all heard the savings principle ‘little and often’, and that we need to be putting money aside for retirement but the reality is that with day to day expenses – holiday plans, or events like Christmas – getting round to saving can always be put off for another day.
This is partly why automatic enrolment, launched by the Government in 2012, has been so successful. It removes the stress from pension saving by taking a small amount from your pre-tax pay each month, and putting it aside for your retirement.
Automatic enrolment has reversed decades of decline in private pension savings and will provide a welcome boost in income for millions in retirement.
Over 9 million people have been enrolled into a workplace pension so far, but today I want to go further and make sure that the next generation of workers get involved when they start their first job.
That’s why we will extend automatic enrolment to people from the age of 18 – bringing them into the savings habit early.
This change will see an extra 900,000 young people start saving for retirement and bring an extra £800 million in pension savings.
Thanks to this policy, young people will rightly have the same opportunity as everyone else to build up a good retirement income and benefit from the success of workplace pensions.
- David Gauke is Secretary of State for Work and Pensions
A review out tomorrow calculates 12million people undersave for retirement.
Experts estimate the new measures will mean someone on average earnings increasing their final pension pot by £60,000.
Analyst Nathan Long of Hargreaves Lansdown said it will “transform retirement prospects”