New job for a new year? Think about all the benefits, including your pension
Simon Lyle | January 13, 2020
Time to read: 4 minutes
Thinking about a fresh start after the new year and looking for a new job, just as millions do each January? These days it’s about so much more than just the salary. Here’s why it could pay to consider all the benefits, including your pension.
New month, new year and a new decade – is it time for a new job too?
Alongside all the resolutions to eat well, save more, and the annual stampede to the gym, the start of the year normally sees a surge in people searching for jobs.
Around one in five of us are on the hunt for a new job in January and while it’s tempting to concentrate on the salary, it pays to look carefully at the whole package.
For some, a pet-friendly office, cycle to work scheme and espresso machine equal work happiness, but there are other benefits that really could make the difference between a good job – and a great one.
Perhaps it’s flexible working, a top talent priority for three-quarters of businesses in 2019, according to LinkedIn. Or it could be generous holidays, discount schemes or health insurance, things that companies keen to hire, and retain, the best increasingly offer.
But what about the pension?
A good pension can add serious value to a job offer and it’s great that nearly seven out of 10 people1 say this is an important consideration when looking for a new job. The good news is that these days employers normally have to set up a workplace pension scheme and contribute to your pension savings for your future.
Your employer now has to contribute at least 3 per cent of your salary when you contribute a minimum 5 per cent, but look carefully at what’s on offer as it could be considerably more and some offer matching schemes; the more you pay, the more they pay.
Even a small increase in what you or your employer pays into your pension could make a big difference to your pension pot in the long run.
Last year, the average employer contribution into defined contribution pension schemes went up to 6.1 per cent. Employee contributions rose too, making an average combined contribution of 14.8 per cent2.
With a salary of £25,000 this could mean a very welcome £3,700 a year going into a pension pot for your future – and it’s not all coming out of your pocket.
It’s not just about ‘now’; this money is invested in your future and could mean you’re more likely to build up bigger pensions savings, although as a pension is an investment its value can go down as well as up and it may be worth less than was paid in.
Add a bit of tax magic
The icing on the cake? You get tax relief on what you save too. For example, if you are a basic rate taxpayer it only costs you £80 to save £100 into your pension. If you pay higher rates of tax, saving can cost you even less.
Not all pensions work the same when it comes to tax relief. But the effect is similar. Check how yours works with your provider.
When you know what’s on offer and what you can put aside, try this pension calculator to see how much you could have in the future.
Have you got a few pensions?
If you’re considering a job move and you’ve had a few in your career already, chances are you’ll have built up several pensions. It might make sense to bring all your pensions together into one to make life simpler. That way it’s easier to keep an eye on how your pension savings are performing and could cut down on admin.
It’s not right for everyone and you wouldn’t want to give up valuable guarantees in any existing pensions, so do check carefully.
If you’re thinking about combining several pensions into one pot – here’s what you need to consider. Standard Life customers can combine pensions online or through the app.
Or if you think you’ve lost track of any old pensions – here’s how to find what’s yours.
Meanwhile, good luck on the job hunt and if you are looking for more inspiration to kick start your finances for the New Year read our 6 great money resolutions for 2020.
1 Research by The People’s Pension for Employee and employer attitudes to pensions as a workplace benefit
2 Based on FTSE® 250 companies – DC Pensions Scheme Survey, Willis Towers Watson, quoted in ‘Employer DC scheme contributions rise 40%’, Pensions Age, July 2019
The information here is based on our understanding in January 2020 and should not be taken as financial advice.
Laws and tax rules may change in the future and your own personal circumstances will have an impact on tax treatment.
Pensions are investments and their value can go down as well as up and may be worth less than was paid in.