Changes to extend auto-enrolment (AE) to lower earners and younger workers could boost younger savers' pensions by £105bn over the next 50 years, analysis from People’s Partnership has revealed.

The Private Member's Bill to extend AE was granted Royal Assent last year, in a move that is expected to ensure that "millions across the country can save more and save earlier".

Indeed, People’s Partnership analysis found that additional pension contributions of £400m per year for 18-21-year-olds will result in an additional £105bn of savings, over the next 50 years, when all returns, fees and further contributions are factored in.

In particular, an 18-year-old with a salary of £15,000 who contributes 8 per cent to their pension will have £4,900 saved by the time they reach age 22, which would add an extra £33,900 to their pension by the time they retire at age 68.

People’s Partnership also clarified that this estimate doesn’t factor in wage growth and compounding of additional contributions, meaning that the total boost to savers’ pensions at retirement could be much higher.

In light of the potential boost for savers, People’s Partnership has called for cross-party agreement, with the support of key unions and trade bodies, on a timeline for implementing the vital reforms.

Whilst the government previously committed to consulting on the implementation of the new measures "as soon as humanly possible", with hopes this could be seen before the end of 2023, the consultation has yet to be launched.

People’s Partnership director of policy, Phil Brown, commented: “The earlier you can save into a pension the better as it means your money is invested for longer and has more time to benefit from growth in investment markets.

“So, the government’s commitment to help younger workers start saving for their future is a huge step forward. But now we need to see promises turned into action, with a cross-party consensus on the timeline for delivering this change, given we have been waiting for this since 2017.

“Automatic enrolment is undoubtedly one of the most successful government policies in living memory, enabling millions of people to save tens of billions of pounds extra into their pension.

“It’s absolutely right that the policy continues to develop so that it reaches its full potential and enables as many people as possible to have the opportunity to benefit.

“With nearly four in 10 people not saving enough for their retirement, the next big challenge for policymakers and the industry is reaching a consensus on how we solve the problem of under saving.”

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