The U.K. government plans to bring an additional £3.8 billion ($5.1 billion) per year into the country’s retirement system by broadening the criteria for automatic-enrollment eligibility.
A review published Sunday by the Department for Work and Pensions said auto enrollment should be applied to new groups of participants in the mid-2020s, such as employees age 18 to 22, lower-income earners and the self-employed. These additional savings are set take total annual contributions via auto enrollment to £24 billion, the department estimated.
By including employees under 22 who are currently not covered by auto enrollment, annual savings could be bolstered by £770 million in the fiscal year 2021 and apply to 900,000 additional savers.
"We will be working toward introducing these reforms in the mid-2020s in partnership with employers and the pensions industry after the contribution increases set for the next two years," said the review.
David Gauke, secretary of state for work and pensions, said in a news release accompanying the review, “This government has rebuilt the U.K.’s savings culture. For an entire generation of people, workplace pension saving is the new normal. And my mission now is to make sure the next generation of younger workers have the same opportunities. We know the world of work is changing, so it is only right that pension saving does too. This ambitious package will see more people than ever before helped onto the path toward building a secure retirement."
The government also said it will review contribution levels after 2019.
The review was welcomed by the retirement industry.
Darren Philp, policy director at the £2 billion The People’s Pension, West Sussex, England, said in a reaction comment: “Extending pensions cover to younger people in the workplace is exactly the kind of move that we were hoping to see from the review. The earlier people start saving, the more investment growth can do the heavy lifting for them in saving for their retirement. It also kick-starts the savings habit from an earlier age. We are pleased to see that people will now be supported to save more as contributions will now start from the first pound of someone’s pay packet."
