Thousands of part-time workers will receive a 'free cash' pension boost of £4,521 within weeks

THOUSANDS of workers are expected to get a big boost to their savings, on top of a pay rise coming in the coming weeks.

Millions of people will receive up to £1,800 more per year in April when the minimum wage rises.

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For those over 21, the national living wage will rise from £10.42 to £11.44.

Nearly three million workers will receive a pay increase of about 10%.

In addition, thousands of workers will also receive a £4,521 increase in their pensions.

This is because they are automatically enrolled in a company pension for the first time.

The threshold at which you start paying is set at an income of € 10,000 per year.

Anyone who works 17 or 18 hours a week will go through this again after the wage increase and start saving for his or her pension.

Steve Webb, partner at consultants LCP, and former pensions ministers, who reviewed the figures for The Sun, said: 'April's big living wage increase will push the wages of thousands of part-timers above the crucial £10,000 threshold.

'At this point their employer will be obliged to enroll them in a pension and make a contribution.

“This could be an important first step towards building a decent pension pot and – most importantly – having enough reserves to retire at a decent age rather than working until you drop.”

Auto-enrolment rules were first introduced in 2012 and there are now 10.7 million people contributing to a workplace pension.

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It is different from the state pension which is based on national insurance contributions.

Both employees and employers pay a pension totaling 8% of salaries.

Employees put in 5% and the company at least 3%, although some offer more.

Those working 17 hours a week currently earn £9,211 a year. But when the National Living Wage rises in April, they will earn an annual salary of £10,113.

For those working 18 hours a week, it will rise from £9,753 to £10,708.

Their employer's additional pension contribution is 3% of their 'qualifying earnings' – that's just over £6,240.

This means that 3% of your salary on this amount is eligible for pension contributions from your employer.

On a salary of £10,000, this means £3,760 is eligible for 3% contributions – equivalent to £112.80 per year.

Over 40 years that works out to £4,512 – and that's before any investment growth is taken into account.

Meanwhile, full-time workers on a National Living Wage will also save an extra £150 a year towards their pension.

When the pay rise was announced in Chancellor Jeremy Hunt's Autumn Statement, Kate Smith, head of pensions at Aegon, said: “A hidden benefit is that the increase in the National Living Wage will also have a positive impact on pension contributions, giving employees larger pension pots. can build up for a more secure pension.

“As a result of the increase in the National Living Wage, an increase to £11.44 per hour (£20,820 per year) means that employees on a National Living Wage will benefit from a total annual pension contribution of £1,166 per year, made up of their own and their employer's pension contributions, meaning almost an extra £150 is added to an individual's pension over the course of a year.”

Over 40 years that's an extra £6,000, again without taking investment growth into account.

From April, the National Living Wage will also apply to 21 and 22 year olds for the first time.

Currently this applies to workers over the age of 23, with younger workers aged 21 and 22 receiving at least the national minimum wage of £10.18.

22-year-olds will also benefit from the pension increase.

But those aged 21 will not, as automatic pension enrollment starts from age 22.

Younger employees may decide they want to contribute to a company pension, but they will have to choose to do so.

Proposals have been made to lower the minimum age from 22 to 18, to ensure that young people start saving for their pension sooner.

The state pension alone, worth £11,500 a year from April, is not enough to live on.

Auto-enrolment was introduced to ensure that millions more people do not live in pensioner poverty.

The latest figures from the Pension and Lifetime Saving Association show that anyone retiring now needs at least £14,400 a year, or £31,300 for a moderate lifestyle.

This would require pension savings of £40,000 and £70,000, and £300,000 and £500,000 respectively.

The figures are based on an annuity, a financial product that provides a regular income from your savings. However, there are also other ways to withdraw your pension.

For a comfortable retirement, including holidays abroad, you need an income of €43,100 per year – a total savings pot of €490,000 to €790,000.