From April 6th this year the amount of money taken from workers’ salaries to contribute to their pension will triple from 1% to 3%. That’s £540 a year for the average earner.
But while more will be taken, more will also be given, with businesses having to double their contribution from 1% to 2%. In effect, the overall minimum level will rise from 2% to 5% – a £5 billion pension contribution increase for British workers.
Employees can choose to opt out, and have a right to take the money now rather than have it saved for retirement. Nevertheless, there are some very good reasons to stay enrolled.
Val Buzzard, director of Whitley Simpson, which is one of the largest accountancy practices in the area, explains: “By choosing to leave a workplace pension, employees are choosing to give up the extra cash their employer contributes, and in the long term that could be a very expensive decision – up to £450,000 over their working lifetime.”
The current age for retirement for men is 65, and for many years it was 60 for women, but that is no longer the case. Women’s pension age is set to rise from 64 until all workers retire at 65 in 2018. It will increase to 68 for both men and women by 2037. Further pension contribution rises are set for April 2019, when the level of contributions will rise to eight per cent; five per cent will come from employees and three per cent from employers.
To employers, the message is make sure your payroll department explains the changes to your staff, and that they in turn know where to go for help and advice.
Whitley Stimpson provides a dedicated payroll service provided by qualified and dedicated staff who advise on current legislation. For further information visit: www.whitleystimpson.co.uk or contact Val Buzzard on 01295 270200 or by email at valb@whitleystimpson.co.uk