Martin Lewis issues ‘important warning’ to workers | European Markets

Martin Lewis has issued an “important warning” to UK employees born between 1959 and 2003 to not miss out on what’s successfully a pay rise.

The MoneySavingExpert founder is urging employees to not choose out of pension scheme auto-enrolment as it should give you important financial savings later in life.

Employers are required to routinely enrol employees into a pension scheme and contribute to each employee aged between 22 and State Pension age – which is at the moment 66 – who earns at the least £10,000 per 12 months.

Your employer should write to you once you’ve been routinely enrolled and inform you the date you had been added, how a lot they’ll contribute, the kind of pension scheme you are in and how to depart if you wish to.

This kind of pension is a financial savings scheme to give you money once you retire on prime of the State Pension, so should you select to choose out you’re lacking out on a enormous quantity of money.

However the essential factor is that your employer is required to contribute to your pension financial savings on prime of your wage. As such, you might be successfully giving up a pay rise as your employer is providing you with additional money that you simply wouldn’t have in any other case acquired, even should you received’t get it instantly.

In most computerized enrolment schemes, you’ll contribute based mostly in your complete earnings between £6,240 and £50,270 a 12 months earlier than tax. The minimal quantity your employer should pay is 3% and the minimal complete auto-enrolment contribution is 8%, so you should pay 5% to fulfill this threshold.

Martin Lewis says hundreds of thousands of UK workers have opted out of pension auto-enrolment schemes – a resolution he says is “a huge mistake”.

Talking on his ITV Martin Lewis Cash Present, he explains: “Whether you are a basic 20% or higher 40% taxpayer, for every £100 you put in, on the minimums your employer would have to add £60 towards your pension pot. But then, we have to look at the tax here.

“Because of course, what you have to remember is for you to put in £100 you don’t actually lose £100, because most people – basic rate taxpayers – you only take home £80 of it, £20 would be tax. So in effect, you lose £80 in your pay packet but you get double that – £160 going into your pension.

“For a higher rate taxpayer it costs you £60 and you get £160 – nearly triple going into your pension, and that is unbeatable. There’s nothing out there like it. Which is why my big message here is, opt out and you’re effectively giving up a pay rise and you’re giving up the tax benefit too.

“Of course you’re going to take home less but what you get in the pension return – the doubling or nearly trebling – is so important, so don’t opt out unless you absolutely have to.”