Should young people focus on their pensions earlier in life?
Workplace pensions and the auto-enrolment process, while not perfect, have certainly helped millions of Britons to put aside retirement savings for the first time in history.
But the legislation behind this initiative still places limits on the compulsory age and earnings at which a person is enrolled.
However, there is a growing number of experts asking whether younger people, aged 18 to 21 years old, would benefit from paying into a pension.
So far, more than 10 million employees have been enrolled into a workplace pension since the changes were introduced in 2012.
However, currently, you need to be aged 22 or over to qualify for auto-enrolment, despite previous promises to cut the threshold to enrol to 18.
Amazingly, according to think-tank Onward, lowering the age of auto-enrolment to 18 could help a person save an extra £20,000 for retirement.
This is just one of several benefits that the think-tank has pointed out, not least improving savings habits earlier in life and creating extra pension savings that could be used to fund UK infrastructure projects that help the economy grow.
Considering these findings and a growing move towards lowering the auto-enrolment age, Conservative MP Richard Holden introduced a Private Members’ bill in January to put pressure on the Government to reform the rules.
This has recommended expanding auto-enrolment to all workers regardless of earnings and scrapping the ‘lower earnings limit’ so that the first and every pound of contributions made during your lifetime qualifies for a matched employer contribution.
For employers, the additional cost would not be easier, but it would certainly encourage many young people to save more, sooner, which could help them to retire sooner or more comfortably when they eventually reach retirement age.
Outside of what the Government is, or perhaps, isn’t doing, the principle of saving earlier for retirement is a good one to follow.
The more money you can save the longer it has to enjoy compound interest.
Even if you save small to start with and then scale up your pension savings as your income increases, you could save much more for later life and potentially reduce your taxable income at the same time.