Rachel Reeves announces 'hidden pension benefit' in Spring Statement which will boost retirement income from next week

In the Spring Statement she said: "Our work [to fix the economy] began in July and I'm proud of what we have accomplished. We increased the National Minimum Wage to give three million people a pay rise from next week."

Workers across Britain will receive a welcome financial boost from April 1, as the National Living Wage increases by 6.7 per cent to £12.21 per hour for those aged 21 and over.

This significant rise will enhance the spending power of our nation's lowest-paid workers, helping to alleviate the burden of rising living costs.

Kate Smith, Head of Pensions at Aegon said: "The boost is almost four times last September’s inflation rate (CPI) of 1.7 per cent the figure used to increase most other benefits. It’s also over double the current inflation rate of 2.8 per cent, announced today.

“There’s also a hidden pensions benefit to increasing the National Living Wage, as it’ll have a positive impact on pensions contributions and enable employees to build up larger pension pots."

For full-time workers, this will translate to an annual salary of approximately £22,222 based on a 35-hour working week.

Beyond the immediate pay increase, workers will also benefit from what experts call a "hidden pensions benefit."

Those on the National Living Wage who are auto-enrolled into workplace pensions will receive an additional £112 in pension contributions over the course of a year.

This means employees will benefit from total annual pension contributions of £1,278, comprising both their own and their employer's contributions.

This pension boost represents a valuable long-term benefit that complements the immediate wage increase, helping workers build more substantial retirement savings.

Younger workers will see even more substantial percentage increases to their minimum wage rates from April.

Those aged 18 to 20 will receive a significant 16.3 per cent increase, taking their hourly rate to £10.

Even more impressive is the 18 per cent boost for 16 to 17-year-olds and apprentices, who will see their minimum wage rise to £7.55 per hour.

These larger percentage increases for younger workers reflect the government's commendable aim to eventually equalise minimum wage rates for all adults regardless of age.

Longer term, the government is also considering opening up pensions auto-enrolment to employees aged under 22, who are currently excluded.

These increases in minimum wages make this even more pressing, as many under-22s are currently missing out on what would be a valuable employer pension contribution and part of their remuneration package.

Despite the increase, the new National Living Wage still falls short of the Real Living Wage, which many employers have signed up to pay and currently stands at £13.85 an hour in London and £12.60 an hour for the rest of the UK.