![](\"https:\/\/www.thesun.co.uk\/wp-content\/uploads\/2023\/06\/79a8122d-0cdb-470d-ae18-98904e302b80.jpg\")
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The proposed changes to the rules would lower the age at which people are automatically placed in a workplace\u00a0pension\u00a0to 18, rather than 22.<\/p>\n
It will also axe the lower earner's limit (LEL) and see a worker on any amount of income be able to save – as it stands a person has to earn at least \u00a36,240 to be able to contribute to their workplace pension.<\/p>\n
The Bill<\/span> in which these proposals are in, the Extension of Automatic Enrolment Bill, headed for a third reading today in the House of Lords.<\/p>\n This is the next stage before the Bill, if passed, receives Royal Assent and becomes law.<\/p>\n Experts at Interactive Investor (II) have crunched the numbers and found the changes could have a hefty payout if they go through.<\/p>\n Someone earning \u00a320,000 at age 18 and paying into their pension until they reach age 66, could get a retirement boost of \u00a3159,000 from the changes.<\/p>\n That's up from \u00a3187,000 with the LEL and only starting saving at 22, to \u00a3346,000 with no LEL and starting saving at 18.<\/p>\n Whereas a worker earning \u00a330,000 at 18 and contributing to a pension until they're 66, could get a retirement boost of \u00a3199,000.<\/p>\n <\/span><\/p>\n <\/span><\/p>\n <\/span><\/p>\n <\/span><\/p>\n This is an increase from \u00a3321,000 with the \u00a36,240 limit from age 22, to \u00a3520,000 starting when they turn 18 with no LEL.<\/p>\n These workings are assuming the standard 5% investment performance net of fees, contributions from age 18 or age 22, as well as 5% employee and 3% employer contributions, and a 2% annual increase in contributions.<\/p>\n Alice Guy, head of pensions and savings, at II said: "The changes seem small, but they could be life-changing for many workers, making it much easier to save enough for retirement, especially for poorer workers. <\/p>\n "It\u2019s great news that pension auto-enrolment rules will now include the youngest workers, as well as including all earnings up to \u00a350,270."<\/p>\n Ms Guy went on to add that the changes are "particularly" good news for women and poorer workers who tend to struggle to save enough to retire.<\/p>\n She said: "Poorer workers are disproportionately affected by the current system that excludes lower earnings from automatic pension contributions."<\/p>\n But, the changes are only one step in the right direction, according to the expert.<\/p>\n Under the auto enrolment rules, an employee has to be signed up to a workplace pension where a minimum total of 8% of their salary is contributed.<\/p>\n Ms Guy added: "It\u2019s important to bear in mind that you may need to save more than the minimum pension amounts to achieve a comfortable retirement. <\/p>\n "In the future<\/span>, policymakers need to consider increasing auto-enrolment percentages above the current rate of 8%, which is not enough for most people to achieve a comfortable retirement.\u201d<\/p>\n Currently, employers must automatically enrol workers into a\u00a0pension\u00a0scheme and make contributions if they are aged between 22 and the\u00a0state\u00a0pension\u00a0age and earn at least \u00a310,000 a year.<\/p>\n As it stands, workers can still opt into their work's pension scheme at 18 but it isn't automatic.<\/p>\n The LEL, of \u00a36,240, is the minimum level of an enrolled worker\u2019s earnings on which they and their employer have to pay contributions.<\/p>\n It's hoped that the lower earnings limit could help to bring more lower earners and people working part-time\u00a0jobs\u00a0into automatic enrolment.<\/p>\n The changes are still a way off at the moment and nothing will change until they are brought into UK law. <\/p>\n But a public consultation on how to implement the changes could begin later this year.<\/p>\n Auto-enrolment is when you're automatically placed into your workplace pension scheme, with your contribution deducted from your pay packet.<\/p>\n Bosses have had to\u00a0automatically enrol staff\u00a0into pension schemes since October 2012 to get workers saving for their golden years.<\/p>\n The only exception is if you're under the age of 22 or earn under \u00a310,000, in which case you have to ask to opt in.<\/p>\n A minimum of 8% must be paid into the pension, with you contributing 5% and your employer paying at least 3%.<\/p>\n Crucially, the contribution you make as an employee is deducted before tax – so the actual amount you're putting away is less than it sounds.<\/p>\n For example, if you pay 20% tax on your earnings, and your pension contribution is \u00a3100, this only really costs you \u00a380 as this is how much that amount would have been worth after tax.<\/p>\n While opting out of a workplace pension would increase your monthly salary,\u00a0it's best to only do this as a last resort, as you'll have less in later life.<\/p>\nREAD MORE IN MONEY<\/span><\/h2>\n
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