Low-income workers across the UK could be hundreds of thousands of pounds better off in retirement thanks to wage hikes being introduced next year. It could see them save up to £208,000 before they retire, in a boost to thousands.

It has been confirmed that the UK’s National Living Wage will rise to £12.71 per hour from April 1, 2026, for people aged 21 and over. This is an increase of 4.1% from the current rate of £12.21 and means a full-time worker will see their pension pot increased by £2,030 a year. If they continued to pay into their savings until the age of 66, they would be £208,000 better off in retirement.

Meanwhile, workers who are employed for 15 hours a week will be eligible for a workplace pension as the change will see them earn over £10,000 a year. Those on minimum wage working 15 hours a week could boost their pension savings by £818 every year, giving them a pot of £84,100 by the time they reach 66.

These numbers assume 3.5% annual earnings growth and 5% annual investment growth. Savers would also benefit from tax relief and employer contributions, which could boost their pot even more.

Pension auto-enrolment was launched in October 2012 and was phased in by employer size, with the largest companies first. It was fully rolled out by February 2018, automatically enrolling all eligible workers into a workplace pension.

When the scheme, established under the Pensions Act 2008, was first introduced, the National Minimum Wage for those aged 21 and over was £6.19 an hour. They needed to earn £8,105 to be automatically enrolled, meaning they needed to work for 25 hours a week to qualify.

Catherine Foot, director of the Standard Life Centre for the Future of Retirement, said: “A rising minimum wage not only boosts pension savings through higher contributions on increased salaries, but it also makes auto-enrolment more accessible.

“With the new National Living Wage from April, working just 15 hours a week will be enough to meet the £10,000 annual earnings threshold, enabling more people to qualify for workplace pensions and start building their retirement savings.”

“Although cost-of-living pressures and immediate financial concerns remain a priority for low-income and part-time workers, even a small amount saved to a workplace pension, which is boosted by valuable employer contributions, can make a meaningful difference to future retirement incomes.

“The Pension Commission will need to strike the right balance between addressing undersaving among the most vulnerable groups and the pressures facing employers with the rising cost of employment.”