Martin Lewis has urged millions of Brits not to miss out on an easy “pay rise” - and it involves paying in to your pension.
The MoneySavingExpert founder estimates around 10% of workers are not enrolled into a workplace pension scheme.
You are auto-enrolled into a workplace pension scheme if you earn over £10,000 a year, are over 22 and below state pension age.
You can choose to opt out, but Martin has warned that doing this means you’re missing out on extra money from your boss.
When you’re opted into a workplace pension scheme, a minimum of 8% must be paid into the pension.
The employee will contribute 5%, with your employer paying at least 3%.
“If you opt out of the pension scheme, you don't get this extra cash,” explained Martin.
“Everyone who is opted in effectively gets a pay rise… as your employer is giving you extra money you wouldn't have got otherwise, even though it's not immediately usable.”
Your pension contribution is deducted from your salary, but this is money you will have access to in later life when you might really need it.
A workplace pension scheme is separate to the state pension, which is dependent on your National Insurance contributions.
There is also no guarantee that your state pension will cover all your needs in later life - the new state pension is currently worth up to 179.60 per week.
Have you chosen to opt out of a workplace pension scheme? Let us know in the comments below.
Your contribution is also deducted from your salary before tax, so Martin explains you’ll be paying in “less than it sounds”.
“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),” he said.
“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).”
The warning from Martin comes after it was confirmed 17,000 more workers will be automatically enrolled into a workplace pension scheme later this year.
The government has confirmed the £10,000 earnings threshold will stay the same for the 2022-23 tax year - meaning thousands more people will benefit as wages rise.
As of April 1, 2022, national living wage will be increasing by 59p from £8.91 to £.9.50 per hour. This works out to an extra £1,000 annually for full-time workers in the UK.
Workers aged 23 and above get the national living wage. For employees aged between 21 and 22, the minimum pay is £8.36, going up to £9.18 from April.
