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Law360, London (July 9, 2020, 5:23 PM BST) -- The U.K. government will pay minimum pensions contributions for young people hired under its £2 billion ($2.5 billion) plan to tackle unemployment, as the country looks toward economic recovery following the COVID-19 pandemic.
The provision is part of the so-called Kickstart Scheme, in which the government will fund six-month work placements for Britons aged 16 to 24, who are claiming universal credit and are "at risk of long-term unemployment."
The placements are "fully subsidized," with the government paying pensions contributions when workers are aged over 22 and are therefore qualified for automatic enrollment in workplace saving plans.
"Our plan has a clear goal: to protect, support and create jobs," Rishi Sunak, the Chancellor, said Wednesday. "It will give businesses the confidence to retain and hire."
The measures are the second stage of the government's plan to support jobs, following the Coronavirus Job Retention Scheme, which ends in October.
Under the furlough scheme, employees are paid 80% of their salaries by the Treasury. According to government statistics dated to May 31, as many as 8.7 million jobs have been supported by the scheme, with claims totaling £17.5 billion.
The Kickstart Scheme will see young workers paid the national minimum wage for up to 25 hours of work a week.
Under regulations over workplace pensions, employers are required to automatically enroll staff in saving plans if they are aged 22 or above and are earning more than £10,000 a year.
The minimum wage for a 22-year-old is £8.20 an hour, meaning an employee working 25 hours a week would have a salary of £10,660, passing the threshold for auto-enrollment.
A government policy paper published Wednesday confirmed that the government would pay 100% of "employer minimum automatic enrolment contributions" as part of the scheme.
Steven Cameron, pensions director at Aegon, said 22-year-olds would get £700 paid over a full year into "what for many will be their first pension."
"This could grow to a substantial sum by retirement, helping avoid these younger employees falling behind in their savings," he added.
--Editing by Alyssa Miller.
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