Chancellor announced plans to raise the National Living Wage and National Minimum Wage to ensure low-paid workers are “properly rewarded for their hard work”.
‘Hidden’ pensions benefit will boost retirement income for millions(Image: )
Rachel Reeves’s ‘hidden pensions benefit’ will boost retirement income for millions of workers. The Labour Party Chancellor announced plans to raise the National Living Wage and National Minimum Wage to ensure low-paid workers are “properly rewarded for their hard work”.
Aegon’s Kate Smith, head of pensions, explained: “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.”
Now, workers putting in fewer hours each week can now meet the qualifying criteria, potentially adding tens of thousands of pounds to their retirement savings over a working lifetime.
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According to Standard Life’s calculations, a worker putting in just 16 hours weekly on minimum wage could accumulate a pension pot worth approximately £84,100 by the time they reach state pension age.
Those employed full-time on the new rate stand to build even more impressive retirement funds, with projections suggesting a 22-year-old starting work today could amass around £208,000 by retirement.
Ms Smith added in her advice for UK households: “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.”
One of the key objectives of the recently reinstated Pension Commission is to tackle retirement savings adequacy among vulnerable groups.
To address this, the Commission is expected to consider reforms to auto-enrolment, including lowering the age threshold for eligibility and removing minimum earning limits.
These changes should broaden the accessibility of auto-enrolment and offer some additional boost to pension pots.
Currently, only one in four low-income private sector workers are saving for retirement.