Under current UK laws, workers over the age of 22 and under 66 is automatically enrolled into a workplace pension through their job.
Workers are earning over £10,000 are being urged to check for a “hidden” pay rise.
Under current UK laws, workers over the age of 22 and under 66 is automatically enrolled into a workplace pension through their job.
You are automatically enrolled when you earn above £10,000, although the lower earnings limit is currently set at £6,240.
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The minimum total auto-enrolment contribution is 8%. Employers must pay at least 3% and the employee the remaining 5%.
Workers also get tax relief on your contributions. Basic rate taxpayers get 20% tax relief, higher rate taxpayers can claim 40% and additional rate taxpayers get 45%, meaning for basic rate taxpayers, putting £100 a month in your pension only reduces your actual take-home pay by £80.
If your employer then puts 3% in, for every £100 a month you contribute, your employer would pay £60. This means if you put £160 a month into your pension, it would have only cost you £80. For higher rate taxpayers, the cost is smaller at £60 for every £100 they invest in their pension.
Martin Lewis says workerss have made the “huge mistake” of opting out of pension auto-enrolment schemes, which effectively means giving up a pay rise. Your employer will have sent you a letter telling you that you’ve been added to the scheme.
You can leave (called ‘opting out’) if you want to. If you opt out within a month of your employer adding you to the scheme, you’ll get back any money you’ve already paid in. You may not be able to get your payments refunded if you opt out later – they’ll usually stay in your pension until you retire.
You can opt out by contacting your pension provider. Your employer must tell you how to do this. You may be able to reduce the amount you contribute to your workplace pension for a short time. Check with both your employer and your pension provider to see if you can do this and how long you can do it for.
Opting back in can be done at any time by writing to your employer. They do not have to accept you back into their workplace scheme if you’ve opted in and then opted out in the past 12 months.