Government proposes to extend auto-enrolment scheme to younger workers

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In a new report, the government has proposed to extend its pensions automatic enrolment scheme to include younger workers.

Under auto-enrolment, employers in the UK are required to automatically enrol all eligible members of staff into a workplace pension scheme, and pay a minimum contribution into the fund. Employees do, however, have the right to opt out.

Currently, only those who are aged between 22 and the State Pension Age (SPA) are eligible to be automatically enrolled into a pension scheme.

Government ministers plan to reduce the lower age limit to 18 by the mid-2020s, in order to increase the eligible target group and get younger workers into ‘the habit of saving’.

Commenting on the proposals, Work and Pensions Secretary David Gauke said: ‘We are committed to enabling more people to save while they are working, so that they can enjoy greater financial security when they retire. 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 towards building a secure retirement.’

However, experts have warned that lowering the age limit for pensions auto-enrolment may burden employers with additional costs. Mike Cherry, National Chairman of the Federation of Small Businesses (FSB), stated: ‘Requiring employers to contribute from the first pound of earnings will mean that, by 2019, hundreds of thousands of small employers will have to pay up to £180 more per employee each year.

‘For employers in certain sectors, such as care and hospitality where margins are tight, this will really add up.’