Today marks not just the start of a new tax year, and all the changes that entails, but also the first increase in automatic enrolment contributions, which will see 5.6 million auto-enrolled savers experience a jump in their workplace pension contributions. Despite the increase, 84% will continue to opt in and save more towards their retirement.
This is according to research by NOW: Pensions, which has looked into today's change that will see contributions rise from 2% to 5% of qualifying earnings, including an increased 2% employer contribution. This means that someone earning £10,000 (the minimum for auto-enrolment) will see at least an additional £78 per year of their pay go towards their pension, as well as a bonus of £38 (which results in an extra £79) from their employer.
Figures from the Institute for Fiscal Studies further show that the largest increase will be felt by those currently earning £46,400 or more, as they will make an additional employee contribution of £818 per year (resulting in a total of £1,210 added to their pension). Their employers will be paying an additional £415 per year, resulting in an extra £806 towards their retirement.
Given these numbers, it's not surprising to find that 23% view their employer contributions as too valuable to lose by opting out of their workplace pension. Additionally, NOW: Pensions data shows that 60% believe that it's important to save into a pension for a more secure future.
Perhaps because of this, 48% of respondents wish they had a better understanding of workplace pensions, while 51% wish they'd been able to start saving into their workplace pension earlier. With 64% aware of the current changes, there's still a clear need for more widespread knowledge.
Of those people that have opted out of their workplace pension, 38% did so because they can't afford the pay deduction, while 24% don't see the point and 19% don't trust pensions. These people would be wise to at least consider another option, as the State Pension on its own is unlikely to make for a comfortable retirement.
Read up on auto-enrolment here
Still confused about your options? Why not have a look at our retirement guides
As an alternative to saving in a pension, consider the Lifetime ISA, which can offer a 25% Government bonus
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