Pensions ‘jolt’ on the way in pay packets

Workers need to boost savings

THE NEXT stage in a “quiet pensions revolution” has got under way as the minimum amounts workplace savers can put into their retirement pots have been increased.

Minimum pension contribution rates under automatic enrolment have been raised as part of efforts to help people build decent savings pots for their later years. The rates have increased to a combined five per cent of qualifying earnings, with a minimum of two per cent from the employer and the remaining three per cent from staff.

In April 2019, the rate will increase again, to eight per cent.

Rebecca Goldring, a tax manager at accounting firm Blick Rothenberg said: “For many this increase will feel like a harsh jolt.”

ON THE face of it, the news that millions of workers in this country will see their minimum pension contributions rise from one per cent of their income to three per cent is good news.

It is the latest stage of what is being dubbed a “quiet pensions revolution” aimed at ensuring people build decent savings pots for when they retire.

However, while the Bank of England is forecasting an increase in wages this year, the increase in monthly pension contributions will no doubt mean that some employees will see their take-home pay diminish as a result.

This, sadly, is the harsh reality facing many hardworking individuals, particularly those on lower earnings, who are already feeling the financial squeeze from rising living costs.

Today’s younger generation are the first to be less well-off than their parents, but the fact is if they want financial security in their later years they must start saving now, and this is the best way of ensuring they do.