If you are one of the 5.6 million people across the country that currently pay the minimum into your workplace pension, from today a little more is going to be set aside each month for your future. On the infographic below you can see how many people in each region will be affected.
As part of the planned roll out of auto enrolment, minimum contributions are rising from 2% of qualifying earnings to 5%. In April next year, contributions rise again to 8%.
If you earn £27,000 this will mean that the amount you pay in each month will rise from around £17 to £52. But, at the same time, the amount your employer will pay in will also rise from £17 to £35.
Research we carried out found over a third (34%) didn’t know the increase was coming but despite this, 84% say they intend to carry on paying into their workplace pension.
Nearly two thirds believe that it’s important to save into a pension for a more secure future, while nearly a quarter (23%) believe that their employer contribution is too valuable to miss out on.
Jasmine Birtles, a financial expert and owner of moneymagpie.com has the following top tips to help you make the most of your pension savings.
Auto enrolment makes saving for the future easy and as with any investment, the sooner you start, the greater the time your money will have to grow thanks to compound interest. If you can set up pension contributions for you baby – however small – they will have a good pot of cash by the time they come to retire.
Even if you’re in your fifties and you haven’t put any money away, it’s not too late to start. The employer contribution is always worth having and the tax relief makes it a very tax efficient way to save. Once you get to 55 you can withdraw any pension savings as cash, or leave it where it is to allow it more time to grow.
Put in extra if you can
Auto enrolment minimum contributions probably won’t be enough for most people to be sure of a comfortable retirement. If you can, it’s worth putting in a bit extra on top of that in order to make the most of the tax saving and just increase the amount you will get when you retire. Thanks to compound interest, any extra you put in now will increase exponentially until you retire.
With workplace pensions your employer puts in money and you get tax relief from the government. Why would you give up that extra ‘free’ cash? It makes sense to stay in and accumulate as much as you can while you’re working.
Make sure your spouse has a pension
If your spouse isn’t working they can still have a pension. You can pay up to £2,880 a year into a pension for someone who is not working. The Government will add in the tax you would have paid on that too so they really get up to £3,600.