The House of Lords is due to sit today for the third reading of the Pensions (Extension of Automatic Enrolment) (No. 2) Bill - its last stage before receiving Royal Assent and then becoming law.

The milestone is positive news for pension savings, reckons Nigel Peaple at the Pensions and Lifetime Savings Association.

Mr Peaple said: “If passed, it will be an important step forward in achieving adequate, fair and affordable pensions for everyone. This bill will provide the legislative footing to extend AE so a greater number of savers will have incomes, sufficient to meet their retirement goals.”

He said that by making it a legal requirement for workers under 18 to be automatically enrolled and removing the Lower Earnings Limit (LEL), millions of people will get a better pension when they retire.

However he warned that for savers to reach an adequate income in retirement, further increases are still needed over the next decade so that AE rises from the 8% pension contribution today to around 12% in the early 2030s – split 50/50 between employers and employees.

Jon Greer, head of retirement policy at Quilter, said: “Central to the bill is the ability to extend pensions automatic enrolment to those employed under the age of 22, a move that signifies the government's intent to bolster the future financial security of younger workers.”

He said the changes recognise the importance of starting retirement savings early and maximising the benefits of compound returns over time.

But he warned that, considering the pressure on people’s finances and particularly the young, the timing of the changes will be key. In addition, the potential reaction of younger workers if the new legislation is implemented swiftly during the current cost of living crisis, is unknown, he said.