Workplace Pensions

The law now says your boss has to set up and pay into a pension for you... you get 1% from them this year. But it's going to grow so make sure you know what you're due!

 

 4 quick facts 

  • Before April 2018 you have to pay in 1% of "qualifying earnings"
  • Your boss has to also pay in 1%
  • From April 2018 you will pay in 3% and your boss 2%
  • And from 2019 it's 5% from you and 3% from your boss

 


 

The Basics

So-called 'Auto Enrolment' means the vast majority of employed people will now have a pension at work. It's a good idea as both you and your company pay in. It's a bit like getting a hidden pay rise which is being accumulated into a pension for you. 

But no pain no gain and you'll also kiss goodbye to some of your monthly paycheck as it's filtered off to Pension Land. By 2019, you'll see 5% of your wages (up to what is generally a £45,000 limit) going into this pension. So your take home pay today will fall. BUT you'll also get a contribution to the tune of 3% from your boss too. This is why choosing to opt-out of these schemes is a bad idea unless you really can't afford it today. You don't pay in? Your boss doesn't pay in. 

 


 

How much are we talking?

As our rule of thumb shows, a 40-year-old on the average wage of £30,000 can expect this to all add up to a final pension amount of about £140,000 by retirement. (With 300 assumptions and caveats!

 


 

Pensions Factsheet

Surprise surprise the detail is complicated so read our factsheet for more information, number-crunching and examples. 

 

Download our simple factsheet

What can I expect? 

 


 

Qualifying earnings

Qualifying earnings is the chunk of your salary falling between £5,876 and £45,000. This caps your boss' contributions – imagine being ITV and having to pay 3% to Ant and Dec with no caps! 

You can choose to 'opt out'. To say you don't want this. No-one can force you to pay in. But it's generally a really bad idea as you then miss your freebie employer contributions and some top-ups from the Government. 

A final note. If you are one of the growing army of the self-employed, you won't have this. That makes it really important to think about using either a Lifetime ISA or a private pension to set something aside for retirement. 

 


 

How much do I need to save? 

Little note on inflation. Just remember when you're doing your numbers that £10,000 today will buy you less in retirement that it does today. Financial advisers talk all of their clients through the impact of inflation- so don't ignore it. 

 


 

Why should I bother with a pension?

 


 

We have 3 case studies demonstrating what your retirement income could look like - meet Margaret, Suzi and Kerry. 

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