Simple rule change could boost pension pots by £46,000 for millions of people

Campaigners have suggested that pension savers could increase their pots by £46,000 through simple rule changes. They are urging the Labour government to introduce new regulations that could effortlessly enhance pensioner pots.

An additional 4.7 million individuals could benefit from employer pension contributions if these rules were altered. Scottish Widows is calling on Rachel Reeves to lower the age threshold for auto-enrolment and eliminate the lower earnings limit.

If this age limit was reduced, it could potentially increase the average future pension pot for 18 year olds by 45 per cent. Pete Glancy, head of pensions policy at Scottish Widows, stated: "The introduction of auto-enrolment in 2012 was a game-changer, but now it's time to scale that up. Reducing the age threshold to 18, lowering earning limits, bringing in self-employed workers, and upping default rates all build on the existing framework and would be incredibly powerful in getting more people in the UK saving enough for the future, while also looking at how people's financial goals complement each other, rather than compete."

Read more: How to get free £175 from Barclays

Currently, employers only contribute to an employee's workplace pension from the age of 22, with a minimum input of three percent, while employees must contribute five percent.

However, by reducing these thresholds, Britons could gain four extra years to grow their pension pots, potentially adding thousands to their retirement fund.

All employers are required to provide a workplace pension scheme, known as 'automatic enrolment'. Employers must automatically enrol workers into a pension scheme and contribute to their pensions if they meet certain criteria: they're classified as a 'worker', they're aged between 22 and the state pension age (currently 66), they earn at least £10,000 per year, and they usually work in the UK.

Scottish Widows has suggested several ways the Government could enhance pension pots. One proposal is to lower the age threshold from 22 to 18, which could increase pension pots by 15 percent.

Another suggestion is to remove the earnings threshold of £10,000, enabling those in low-paid jobs, such as part-timers, to augment their future pots. This would eliminate employers' ability to subtract the lower earnings limit from an employee's salary before calculating their pension contributions.

Lastly, the Government could increase default contributions to 12 percent, deducting more from workers' pay now to help them save more for their retirement pots.