Most employees will see contributions towards their workplace pension increase to 3% from 6 April 2018 under the government's flagship auto-enrolment scheme.

Until the start of the 2018/19 financial year, all workers earning more than £10,000 a year and aged between 22 and state pension age have been putting 1% of their monthly pay packet into their workplace pension.

The first workers were automatically enrolled in October 2012, with staging dates bringing more than a million businesses and their employees into workplace pension schemes for the first time.

More than 9 million eligible workers have benefitted from minimum employer contributions of 1% towards their workplace pension, with these rising to a minimum of 2% from 6 April 2018.

Under the latest phase of auto-enrolment, all qualifying employees will see a total of 5% go into their workplace pension in return for sacrificing just 3% of their monthly salary.

Fast-forward to 6 April 2019 and the contribution levels will rise again - to 5% from staff and 3% from their employer, bringing the total contribution to 8%.

As a result of the phased increases, estimates suggest an extra £17 billion a year will be saved into workplace pensions by 2019/20.

Guy Opperman, minister for pensions and fiscal inclusion, said:

"Automatic enrolment is fundamentally changing the way people save for the better.

"However, the long-term success of automatic enrolment can only be sustained if people continue to understand the benefits of saving.

"With planned increases in [total] minimum contribution rates to 5% in 2018 and 8% in 2019, putting money aside every month needs to be the default choice for people in work and the right thing to do for your future self."

How popular is auto-enrolment?

Every eligible employee has the option to opt out of their workplace pension, although the overwhelming majority of workers believe the scheme benefits them.

According to the Department for Work and Pensions, more than 4 in 5 eligible workers (83%) see saving through a workplace pension as the normal thing to do if you are in full-time employment.

78% of eligible employees were automatically enrolled in 2016 - up 23% from 55% before the workplace pension reforms were introduced 4 years earlier.

Only 9% of all eligible workers chose to opt out of auto-enrolment, with the opt-out rate remaining unchanged from 2015.

The opt-out rate was higher for those employed by small (12%) and micro-sized enterprises (10%), compared to those working for medium (9%) or large (8%) firms.

People in their early 60s represent the majority of those who've opted out, with the rate leaping from 4% of 22 to 29-year-olds to 33% of 60 to 64-year-olds.

Contact us to discuss your savings strategy.

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