Young workers are missing out on a £34,000 boost to their pensions as the Government has failed to enact a long-standing plan to encourage saving. 

The Government has come under renewed pressure to change the rules around workplace pensions, which currently exclude millions of workers. A private members’ bill proposed in Parliament yesterday by Conservative MP Richard Holden called for a shake-up to allow those under the age of 22 and anyone earning less than £10,000 to be automatically enrolled into a company pension.

Under the current system, anyone below that age or earnings threshold is not automatically given a pension upon joining their company. 

Mr Holden said an extra £2.77 trillion could be saved towards retirement if new rules were implemented. Even the smallest pension contributions can add years of additional income by the time a worker reaches retirement.

An 18-year-old starting their first job earning £17,680 a year would miss out on £6,326 worth of pension contributions as they are not automatically enrolled in a workplace pension under the current system until age 22. This would snowball to £33,931 by retirement age when accounting for investment returns, according to a report by think tank Onward. 

In 2017, the Government promised to reduce the age limit to 18 and remove the lower earnings limit. However, it said it would only implement this by the mid-2020s.

A spokesman at the Department for Work and Pensions said it still planned to change the rules but only at an “affordable” time. “We want to make sure that these changes are made in a way and at a time that is affordable, balancing the needs of savers, employers and taxpayers,” he said.

Pete Glancy of Scottish Widows, a pension provider, said the Government had failed to make progress despite its pledge. “This bill is a welcome nudge towards change that would help low earners and multi-jobbers, who are penalised by the unfair system,” he said. 

Nearly one million low earners with multiple jobs are missing out on £76m a year in pension contributions that could be made by their employers, research from Scottish Widows has found. 

Workers on very low salaries should be able to opt out of pension contributions if they are struggling to make ends meet but still receive a contribution from their employer, Mr Glancy said, urging the Government to go a step further.

However, Boris Johnson and Chancellor Rishi Sunak will be conscious that expanding auto-enrolment will also come at a cost to businesses, Tom Selby of AJ Bell, a stockbroker, said.

“Given the significant strain many firms have been under for the last two years as a result of Covid and the subsequent national lockdowns, laying extra pension costs at their doors now might risk subduing the UK’s economic recovery. Waiting a year or two so that, hopefully, the economy is a little less fragile may well be the preferred option,” he said.

The Government’s auto-enrolment policy, first introduced in 2012, has been successful in getting more people to save as it means all workers have been automatically enrolled in company schemes unless they opted out. 

So far, an extra 10 million people have a pension and an additional £28.4bn has been saved since 2012, according to figures from the DWP.