Start saving for your pension at 18, says Legal & General boss

Daily Mail​

19-07-2025

The boss of Britain's biggest money manager has called for the age at which workers are automatically included in company pensions schemes to be cut to 18 to help them save more for retirement.
Antonio Simoes, chief executive of Legal & General, said lowering the threshold from 22 would also boost the economy now and lessen dependency on state benefits in the future.
Hundreds of thousands of young people in their first jobs, apprenticeships or in temporary or holiday work would also develop the savings habit early.
The boss of the £14.4 billion FTSE 100 giant said: 'The challenge of pensions adequacy – making sure all of us have enough to live on in later life – is urgent and pressing.
'Adequacy depends on three things: how much people are putting in, what returns they get and, crucially, when they start.
'The best financial gift we can give young people is time. A pension opened at 18 may not seem much now, but in 30 or 40 years it could mean everything. So let's stop wasting time. Let's start saving it.
'Currently, auto-enrolment schemes, which cover millions of workers at companies without their own pension funds, are only open to those aged 22 and over.'
He pointed to countries such as Australia and Canada where the auto-enrolment age is already 18, showing that it was possible.
The controversial call from Simoes, who heads a business that manages £1.2 trillion of pensions and other savings, comes ahead of tomorrow's launch of the long-delayed Government review of Britain's grossly inadequate level of retirement provision.
The study, to be led by Pensions Minister Torsten Bell, will investigate the significant inequalities between retirees with generous company pensions and those who are reliant on the basic state pension, having accumulated little or no other savings.
As well as trying to find solutions to retirement poverty, the review may also allow people to dip into their pension pots at any age if they are short of cash.
Also on the agenda will be the thorny issue of raising auto-enrolment pension contributions. These currently stand at 8 per cent and are split between the employer, who pays in 3 per cent of a member of staff's earnings, and the employee, who pays in 5 per cent of their earnings. There is pressure to raise the total contribution to 12 per cent.
But such a measure is likely to be delayed against the background of the furore over the increase in employers' National Insurance contributions in April, which Chancellor Rachel Reeves announced in her Autumn Budget.
The Federation of Small Businesses has already voiced its opposition to a rise in auto-enrolment contributions.
Simoes' plan to extend auto-enrolment to 18-year-olds is also likely to meet resistance, as this would impose even more of a burden on businesses.
But the L&G boss said the benefits would be likely to outweigh the costs.
'It would be a win-win. Those at retirement would be in a stronger financial position, less reliant on the state,' he said. 'And when more people save, more capital is available for the UK economy, supporting jobs, infrastructure, and national resilience.
'Bigger pension pots could be channelled into productive investment, helping to fund growth and regeneration. And retirees would have more to spend.
'This matters, given that consumer spending drives 63 per cent of UK gross domestic product and retirees already account for a quarter of that total.'
The L&G boss's intervention comes after Labour announced last week that the voting age is to be cut to 16 from 18 by the time of the next general election, fuelling an ongoing debate about at what age people should assume responsibility for decisions, including over their finances in later life.
...but Mayor's plan 'could leave majority worse off'
A plan to grow workplace pension pots faster by taking more risk has been slammed as 'truly bizarre' by a leading consumer campaigner this weekend, in a move that could leave retirees 'worse off'.
Tesco, BT, and NatWest are among more than 20 firms that have signed up to an 'employer pension pledge', which prioritises maximising returns for savers over charging them low fees.
The move is led by City of London Mayor Alastair King, who says hiring more expensive fund managers to invest in riskier 'alternative' assets – such as private equity and infrastructure – will deliver better long-term returns for pension savers than only investing in the stock market.
Boosting the size of pension pots matters because most of the population is not saving enough for even a modest retirement.
But experts say King's plan is flawed because high fees devour investment returns over time.
'When it comes to investing, the only certainty is cost,' said James Daley, head of the Fairer Finance campaign group. 'The assertion is that pension funds which are keeping costs low are delivering worse returns, but I've not seen any evidence to support that.'
Most 'active' pension fund managers, who pick their own investments rather than track the stock market, underperform in the long run, he added, saying: 'The new employers' pledge is truly bizarre. I am surprised so many serious firms have put their names to it. If this pledge results in more firms investing more of their employees' money in more expensive funds, the stats tell us the majority will be worse off.'
Critics say the pledge also fails to tackle an even bigger problem – the lack of cash going into workplace pension schemes, especially from employers.
Under auto-enrolment, 2.4 million firms pay a minimum of 3 per cent of a worker's salary into their occupational pensions, which are then invested on their behalf without any guarantee of a set income when they retire.
More than 11 million private sector workers chip in at least 5 per cent of their salary to save for their golden years in this way.
These minimums could rise in a long-delayed Government review of retirement savings, which is due to be announced by Pensions Minister Torsten Bell tomorrow.
Fees are capped at 0.75 per cent a year of a fund's value for default funds, driving some schemes to opt for cheaper, 'passive' forms of stock market investing.
'The knock-on impact of this heavy focus on fees has been shrinking allocations to UK equities, starving UK companies of capital,' said Jason Hollands of wealth manager Evelyn Partners.
The Government has no plans to lift the fees cap, but hopes to keep costs down by encouraging more pension funds to merge into larger schemes to invest in private companies, Hollands said.
King, who founded his own fund management firm, also called for the cash Isa allowance to be cut from £20,000 a year to boost investment in UK firms. That idea is on hold after a backlash by building societies, which rely on savers' cash deposits to fund home loans and other lending.