Pension savers could boost their pots by £46,000 with a simple rule changes, according to campaigners.
They are calling on the Labour government to introduce new rules that could help boost pensioner pots with little to no effort.
An extra 4.7million people could receive pension contributions from their employers if the rules are changed.
Scottish Widows are urging Rachel Reeves to lower the age threshold for auto-enrolment and remove the lower earnings limit.
If this age limit was lowered, it could help boost the average future pension pot for 18-year-olds by 45 per cent.
Pete Glancy, head of pensions policy at Scottish Widows, said: “The introduction of auto-enrolment in 2012 was a game-changer, but now it’s time to scale that up.
Scottish Widows are urging Rachel Reeves to lower the age threshold for auto-enrolment and remove the lower earnings limit
GETTY“Reducing the age threshold to 18, lowering earning limits, bringing in self-employed workers, and upping default rates all build on the existing framework and would be incredibly powerful in getting more people in the UK saving enough for the future, while also looking at how people’s financial goals complement each other, rather than compete.”
Under existing rules, employers only contribute to an employees work place pension from the age of 22
Employers put in a minimum of three percent while employees must put in five percent.
However, by lowering the thresholds, Britons can have four extra years to build their pension pots, which in turn can add thousands of their retirement fund.
All employers must provide a workplace pension scheme. This is called ‘automatic enrolment’.
An employer must automatically enrol workers into a pension scheme and make contributions to their pension if all of the following apply:
- They’re classed as a ‘worker’
- They’re aged between 22 and state pension age (currently 66)
- They earn at least £10,000 per year
- They usually (‘ordinarily’) work in the UK (read the detailed guidance if you’re not sure)
Scottish Widows proposed a few ways the Government could boost pension pots.
The Government could consider lowering the threshold form 22 to 18 as this could add 15 per cent to pension pots.
They could also consider removing the earnings threshold of £10,000.
This could allow those in low-paid work, such as part-timers, to boost their future pots.
It would take away employers' ability to deduct the lower earnings limit from an employee’s salary before calculating their pension contributions.
Finally, the Government could raise default contributions to 12 percent, taking more from workers' pay now to help them save more for their pension pots.