How the workplace pension is changing savings habits
MoneyPlus Features Team | April 12, 2018
You might have seen the adverts running on TV recently, encouraging people to save into their workplace pension. Chefs are busy cooking, while the voiceover says, “Having a workplace pension is like having another you, at work, helping earn money, for when you retire.”
Saving seems so normal and every day, which has got to be a good thing.
It’s all thanks to auto-enrolment, which started just over five years ago and has opened up saving for a lot more people from all walks of life, whatever age they are, and wherever they work.
Eligible workers are automatically joined into their workplace pension scheme; pay some of their salary in, and their employer has to contribute too. So yes, it is a bit like having “another you” at work, earning extra money for your future, whatever you want that to look like.
It started small, with employees contributing 1% of their salary, which their employer had to at least match.
While employees can opt out of saving, only around one in ten have chosen to. As such, most people are now saving monthly towards their pension.
Nearly 10 million people had been auto enrolled at the last count. As The Telegraph highlighted recently, nearly three-quarters of workers now save into their workplace pension. Just before auto-enrolment started, it was under half.
Contribution rates are going up: What it could mean for you
While the first few years were really about getting everybody into a workplace pension, the next couple of years are about getting people to save more.
From 6 April 2018, employees need to contribute a minimum of 3% of their salary, with an employer contributing at least another 2%. Both will step up again next year.
“I feel like I’m paying my future self”
Kirsty McKenzie, a graduate in her mid-20s working for Standard Life, is part of the younger generation which is really embracing the idea of saving for their future, while enjoying life to the full.
“Yes, it’s taken a bit of practice for me and my friends to get into the savings habit. We enjoy spending money now, but we want to be able to keep on spending it in the future. By saving into my workplace pension, I don’t feel like I’m giving anything up. It comes straight out of my salary, so I feel like I’m paying my future self.”
Whether you’re a Millennial and a long way off even thinking about taking your pension savings, or it’s just around the corner, saving for your life after work is a great habit to get into.
A pension is an investment and you could get back less than you paid in. Tax and legislation may change and the information here is based on our understanding April 2018 and shouldn’t be taken as financial advice. Your own circumstances will have an impact on tax.