POTTING MORE ££S

Automatic enrolment has meant almost 75% of workers are now saving for their retirement, up from just over 66% in 2016.

While it is excellent news, the amounts being put by would still leave many people struggling in older age. But that’s about to change because the minimum contribution from both employees and bosses is being increased.

Bosses and workers now put away a minimum 1% each. From April 6 that rises to 3% for employees and 2% for employers and then it will rise again in April 2019 to 5% and 3% respectively.

Analysis from NEST, the workplace pension scheme backed by the Government, shows if contributions remained at current levels a 21-year-old on an average £23,000-a-year wage would have about £32,000 saved by 68. But with the increase in contributions in April, which will see the same worker paying in an extra £5.27 a week, the pot would build up to almost £80,000.

Increased contributions from April 2019, costing an extra £7.90 a week for the same worker, could mean a more impressive pot of more than £125,000.

People may need to push themselves to put slightly higher amounts away, but the gains over the longer term will mean they can have a much more comfortable retirement.

Pension experts believe we need to be saving between 12% to 15% of our earnings.

The first two increases in AE contribution levels are still below this. But they mean people are beginning to put away a more realistic figure and it’s a good start on the road to a more financially secure future.

Zoe Alexander, director of strategy at NEST said: ”A workplace pension is a great option for most people. Your employer will contribute too and you’re already likely to be enrolled so you don’t have to do anything. Contributions rise in April, but for people earning the UK’S average this could mean only paying about a pound a day. Keep saving and a pot of around £125,000 could be waiting for them at retirement.”

■ Figures are based assuming contributions will rise with inflation and the pot will grow 2%-3% above inflation at 2.5%. The final pot will depend on many things that can change over time.