Martin Lewis is urging workers not to miss out on a “hidden pay rise” from their employer.
His warning relates to pension auto-enrolment.
You’re auto-enrolled into a workplace pension scheme if you earn over £10,000 a year, are over 22 and below state pension age.
When you pay into your workplace pension, your employer must also contribute to your pension savings.
This means you’re getting extra money you wouldn't have got otherwise, even though you can’t access it until later in life.
The minimum total auto-enrolment contribution is 8%. Employers must pay at least 3% and the employee the remaining 5%.
This does mean you’re giving up part of your take-home pay, as you’re saving from your current salary.
However, your contributions come from your pre-tax salary, meaning you’re actually spending less than you probably think.
Contributing to your pension - workplace or private, not your state pension - attracts tax relief at your highest marginal rate.
Basic rate taxpayers get 20% tax relief, higher rate taxpayers can claim 40% and additional rate taxpayers get 45%.
This means 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 issued an auto-enrolment reminder in the latest MoneySavingExpert.com email.
He said: “Are you an employee? Don't throw away a hidden pay rise.
“This is about auto-enrolment pensions - almost everyone should try to avoid opting out - or you're throwing away free cash from your employer.”
New proposals backed by the Department for Work and Pensions (DWP) want the auto-enrolment age to be reduced from 22 to 18.
The lower earnings limit - the point from which your earnings are used to calculate the amount of pension contributions that will be paid into a scheme - is currently set at £6,240.
This would also be abolished as part of the proposals.
