Webb insists debt no barrier for young

In an exclusive interview with PW last week, he said young people will gain most from auto-enrolment because many have never considered pensions before, and need to save despite being financially strained by the economy.

He described student loans, now typically up to £50,000, as “red herrings” because repayment levels have been reduced, leaving graduates with higher disposable incomes than under the previous system.

And he said an auto-enrolment minimum contribution would not be the difference between people being able to afford to get on the property ladder and just falling short of it.

He said: “You’ve got to question what people would really be spending their money on if they weren’t saving into a pension. We all make choices about our spending – sometimes it might be nice things like a Sky TV subscription.

“Clearly mortgages are part of the picture, but we’re staging this very gradually, and it’s only going to be 4 per cent of band earnings. Young people should not opt out – as it’s the same as giving up on a payrise. It’s free money you wouldn’t be getting otherwise.

“Many people who don’t have much in retirement now really wish they’d started saving earlier, and that’s my message to 22-year-olds.”

But Ros Altmann, director general at Saga, disagreed with Webb. She said: “Most financial advisers would suggest saving in a more flexible way than pensions or paying back debts, rather than locking money into a pension fund while young.

“Buying a home is important, paying back debt is also important, and any money put into a pension cannot be used for that.

“Obviously an employer contribution and tax relief add to the attractions of pensions but Isas are tax free, and owning rather than renting a home can be financially advantageous too.”

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