MARTIN LEWIS, known as the Money Saving Expert, appeared on TV, to share his latest money saving tips. In the segment, he chatted about how UK workers are about to get more money, thanks to changes to pensions coming in April.
A pay rise is something most people would welcome, meaning it could be good news for those aged 22 or older in the UK. Today, Martin Lewis, 46, explained that these employees could be set to get a pay rise in the near future. It comes in the form of pension auto-enrolment. This is where your employer must contribute to your pension, and on April 6 this year, they will have to contribute even you more.
This rule is designed as a savings scheme for you later in life, on top of the state pension.
It has an auto-enrolment rule which means employers must opt in all employees who are older than 21, and earn £10,000 from the job.
This savings scheme means that some of your salary will automatically be put towards this form of private pension – rather than it heading straight into your bank account.
What’s more, provided you haven’t opted out, your employer will also need to contribute to this fund – on top of your salary.
“I’m a big supporter of this because we are very bad at planning for our financial future,” Martin said.
On April 6, the amount you must contribute is set to increase by a substantial amount.
This means that while you’ll get less money to spend on each pay rise, your employer will also be paying higher contributions.
At the moment, the minimum contribution stands at five per cent of your pre-tax salary, with your employer currently paying two per cent.
As of April 6, this will rise to eight per cent – of which your employer will have to pay a minimum of three per cent.
This means that your contributions would rise from three per cent to five per cent.
However, there are circumstances which could affect this, as Martin explained.
“If it [your employer] is putting in more than the minimum your contribution won’t have to rise by as much,” he said.
“For example, if it puts in four per cent yours will only need to rise to four per cent. Do check your own situation.”
Martin explained: “The first thing to understand is hey, the good news, it’s a pay rise.
“The bad news, it’s taking money away from your disposable income so you’ve got less take-home pay.”
This means that your employer will effectively be paying you more money – although you’ll only be able to access it after you’ve retired.
Martin explained that he was in favour of the auto-enrolment for most people, adding: “Many people are scared of making financial decisions, and inevitably most of us are guilty of sacrificing the future for the now.
“This way, make no decision, and it’s hopefully the right one.