Interactive Investor

Auto-enrolment changes could deliver £112K boost to your pension

11th July 2023 16:45

by Alice Guy from interactive investor

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The changes could help close the 35% pensions gender gap.

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Interactive investor welcomes plans to expand auto-enrolment, something we have campaigned for since 2019.

Alice Guy, Head of Pensions and Savings, interactive investor says: “It’s great news that the government are looking to extend pension auto-enrolment rules to cover all earnings up to £50,270 and all employees aged 18 or older. At the moment pension auto-enrolment is only for employees aged 22 or over and only earnings over £6,240 are automatically included as pensionable pay.

“Expanding auto-enrolment will particularly benefit women, who are more likely than men to be working part time on a low income and more likely to be living in poverty in retirement. This policy could go some way to closing the pension gender gap, which is currently 35% by the time women reach age 55.

“However, the government need to keep up the momentum as the timetable for this plan is not yet clear and there’s a danger that improving pension outcomes drops off the list as the next election looms.

“The government’s plans to scrap the lower-earnings limit and expand auto-enrolment to 18-year-olds give lower paid employees have a better chance of building a decent-sized pension pot and achieving a comfortable retirement. Someone earning £20,000 between the ages of 18 and 62 could end up with £112,925 more in their pension pot after 44 years, due to the combined impact of an extra four years’ contributions and their own and employers’ contributions being based on their whole salary.”




Monthly pension contribution

Potential pension pot after 40/44 years

Monthly pension contribution

Potential pension pot after 40/44 years

With £6,240 lower earnings limit and starts at age 22





With no lower earnings limit and starts at age 18










Assumptions: 5% investment performance net of fees, contributions from age 18 or age 22, 5% employee contributions and 8% employer contributions on eligible earnings.

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