Calls for working 18-year-olds to be forced to pay into retirement pension pots

Calls have been made for working 18-year-olds to be compelled to start paying into a pension pot as part of proposed new legislation.

Under the plan, automatic contributions would be deducted from the pay of young adults who are not in full-time education.

It is being put forward by Tory MP Richard Holden, who will present his idea to Parliament.

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The aim is to give young people who are in work a head start in saving for their eventual retirement by helping them to make an extra four years’ worth of contributions.

If adopted, it could potentially see them earn 50 years’ of compound interest.

Under the current regulations, employers must provide a workplace pension – but only for staff aged 22 and over who are earning over £10,000.

As things stand, companies and workers both contribute to the retirement pot, with employees automatically enrolled in a pension scheme unless they opt out.

Mr Holden said his proposal would make the system much fairer and would benefit young people in the long term.

“The majority of my constituents start work at 18,” he told PA news. “I think it’s only fair that everybody, when they start work, should be getting this contribution.”

He added: “It shouldn’t just be something for graduates, or when everybody else happens to graduate, because the compound interest for decades will mean so much more.”

North West Durham MP Richard Holden
North West Durham MP Richard Holden

The MP also wants the £10,000 threshold to be changed, claiming is was grossly unfair for anyone working two part-time jobs that both pay less to miss out.

“I think this could make a real, real difference to the retirements of people across constituencies like mine, making that retirement a bit easier,” he said.

Mr Holden said that ensuring people are more financial secure when they are older could also lessen dependency on state benefits in the future.

He added that it would also help address imbalances between different parts of the country where young people are more likely to go straight into work from school rather then attend university.

The MP will need the support of government ministers if his Pensions (Extension of Automatic Enrolment) Bill has any chance of progressing when it is introduced in the Commons on Thursday (January 6).

Although the Department for Work and Pensions is aiming to abolish the lower earnings limit and reduce the age for automatic enrolment, it does not plan to do so until the mid-2020s.

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Leicestershire Live – Leicester News