Contributions encourage people to stay

MORE people in the UK are saving towards retirement than ever before - according to data from the Office for National Statistics (ONS) - with numbers boosted thanks to the Government’s auto-enrolment scheme.

Under auto-enrolment, employees are automatically signed up to a workplace pension into which both they and their employers must contribute.

Workers can opt out of the scheme if they want to, but the hope is that valuable employer contributions will encourage people to stay. The scheme was introduced in October 2012 to boost the numbers of people planning for retirement and began with the largest employers first, followed by medium-sized, then small employers.

Nearly three quarters of employees were contributing to a company pension scheme in 2017, latest ONS figures show, up from 67 per cent in 2016. Those aged between 22 and 29 had the biggest growth in pension membership, with 73 per cent in this age group belonging to a pension in 2017, compared to 65 per cent the previous year. Prior to April 6, 2018, employees only had to contribute 0.8 per cent of their qualifying earnings into a workplace pension, topped up by 0.2 per cent tax relief, whilst employers paid in one per cent.

Minimum contributions for autoenrolment increased on April 6, so workers must now pay three per cent of their qualifying earnings into a pension, including 0.6 per cent of tax relief, while employers must make contributions of two per cent.

Your qualifying earnings are your earnings from employment, before Income Tax and National Insurance contributions are deducted, that fall between a lower and upper earnings limit set by the Government. These limits are £6,032 and £46,350 for the current 2018/19 tax year.

Next year, contribution limits will increase again, so that from April 2019 employees must pay in five per cent of qualifying earnings, including one per cent of tax relief, and employers must pay in three per cent.

It’s important to remember that these are only minimums, so you or your employer can choose to pay more into your pension if you or they want to.

Saving for the future is vital if you want to enjoy a comfortable retirement.

Relying on the state alone to support you could prove a costly mistake, particularly as the age at which you can claim the state pension is being pushed further and further back. Oliver Mellor Dip PFS, BA (Hons)

Information based on our current understanding of taxation legislation and regulations.

Any levels and bases of, and reliefs from, taxation are subject to change. Tax treatment is based on circumstances and may be subject to change in the future.

Although endeavours have been made to provide accurate and timely information, we cannot guarantee that such information is accurate as of the date it is received or that it will continue.

No individual or company should act upon such information without receiving appropriate professional advice after a thorough review of their particular situation.

We cannot accept responsibility for any loss as a result of acts or omissions.