U.K. bill would increase DC retirement savings

U.K. workers will soon see an increase in contributions flowing into their defined contribution plans as a result of upcoming changes to automatic enrollment rules.

Back by the U.K. government Friday, a private members’ bill will make the long-awaited amendments that are expected to boost retirement savings.

The new rules would require plan sponsors to start making contributions to their employees’ DC plans from the first pound earned rather than only when their salaries reach a certain earnings limit as is currently required.

Workers will also be able to start saving earlier, when they reach 18 years of age — a change from 22 years old.

The changes will pave the way for plan participants to save more toward retirement, with estimates that low earners could see their contributions double.

Steve Webb, partner at consultant Lane Clark & Peacock, said in an emailed comment about the bill: “This is truly a landmark day for U.K. pensions.”

“That the government is backing the necessary legislation the way is cleared for younger workers to be brought in and for lower earners in particular to build up pensions more quickly,” Mr. Webb added.

Nigel Peaple, director of policy and advocacy at Pensions and Lifetime Savings Association, added in a separate emailed comment: “The news that the government, in the form of the Minister for Pensions, Laura Trott, has not opposed the bill, means these changes are very likely to make it into law at some point over the next year with the result that millions of people will get a better pension when they retire.”

The bill is expected to be approved by the U.K. House of Commons and U.K. House of Lords after it was endorsed by the Department for Work and Pensions on Friday.