Martin Lewis gives auto-enrol pension warning as Brit workers face losing money
Martin Lewis has warned that millions of Brits have turned down a pay rise without realising they have.
The money-saving guru shared the warning in a new blog post on his website moneysavingexpert.com.
He claimed that 10% of the workforce have currently made the error and said many others are at risk of doing it.
Martin says it happens when your employer "auto-enrols" you into a pension scheme, but you decide to opt out – which he says in most cases, is a "huge mistake".
Auto-enrolment means companies must opt in their employees (aged 22 to state pension age) who earn above £10,000 a year to pay towards a private pension.
This type of pension is a savings scheme to provide workers in later life on top of the state pension.
Martin claims the pension is "worth it", as it's not guaranteed that the state pension will provide a decent standard of living in future years.
He adds: "Yet crucially, when you pay into your workplace pension, your employer must also contribute to your pension savings – on top of your salary.
"If you opt out of the pension scheme, you don't get this extra cash. The effect of this is a bit of a mind twist…"
Martin explains that everyone who is opted into the scheme "effectively get a pay rise" as your employers is giving you extra money, even though you can't use it straight away.
But he says those also opted in get less take-home pay, adding: "To get the extra money, you are saving from your current salary; so your disposable income, the amount you can spend each month, is reduced."
But Martin says he thinks it's a good decision in the long run.
The minimum amount that must be contributed has increased since auto-enrolment started, with the current minimum contribution 3% (max on earnings up to £50,270, if you earn more, they can cap it as if you earned £50,270).
Meanwhile the minimum total auto-enrolment contribution is 8%. This i the total that you and your employer together must put in.
Martin says it costs as little as £80 to get £160 added to your pension savings though.
He writes: "Pension savings come from PRE-TAX salary, so putting £100 a month in your pension only reduces your pay packet by £80 (£60 for higher 40% rate taxpayers).
Like what you see? Then fill your boots…
Want to bring a little glamour to your life every day with all the most exciting real-life stories, fashion and even sex tips HOT off the press?
Well, we've got you covered with our great new Hot Topics newsletter – it'll drop straight into your inbox around 7pm and you can unsubscribe whenever you like.
And signing up now means you'll get a front row seat for our great new series inside the lives of the next generation of Daily Star Page 3 girls.
You can sign up here – you won't regret it…
"Plus at the minimum level, if you put 5% in, your employer has to put 3% in. That means even with the minimum contribution, if you put in £100 a month, your employer would put in £60, so there's a total £160 a month added to your pension, but that only costs you £80 (£60 at higher rate)."
Over a year, this means your pay packet will be reduced by £960 as a basic rate taxpayer (£720 higher rate), but your pension would have an extra £1,920 added to it.
Read Martin Lewis' blog post to find out even more about pensions.
Meanwhile, he may be good with money, but some people aren't loving Martin's cooking recipes.
Some slammed the expert online over his unusual guacamole recipe.
Source: Read Full Article