‘Hidden pension benefit’ as millions to get pay rise next year

Rishi Sunak grilled on National Living Wage

We use your sign-up to provide content in ways you’ve consented to and to improve our understanding of you. This may include adverts from us and 3rd parties based on our understanding. You can unsubscribe at any time. More info

Pension saving can be challenging, especially as it essentially involves sacrificing now for the future. For this reason many people, especially those who are low paid, may choose to opt out of the endeavour to keep money in their pocket. However, a vital update occurring in 2022 will not only give Britons more money, but also benefits in the long-run for their pension.

Those who are set to benefit are workers currently on the National Living Wage (NLW).

This sum is an obligatory payment issued to workers who are aged 23 or over, and is similar to the National Minimum Wage (NMW).

Recent data collated by the Low Pay Commission estimates there were around two million workers paid at or below the minimum wage in April 2020.

This makes up for approximately seven percent of all workers across the United Kingdom.

In April 2022, the National Living Wage (NLW) will increase by 6.6 percent, to £9.50 per hour.

While this is good news in and of itself, experts have highlighted other potential benefits which could arise.

Steven Cameron, Pensions Director at Aegon, said: “There’s a further hidden benefit. 

“As well as an increase in pay, automatic enrolment means eligible employees will receive increased pension contributions to their workplace pensions as their income rises.

Pension alert: Shocking charges could destroy your retirement [EXCLUSIVE]
Inheritance tax alert: ‘Middle-income’ Britons set to pay hefty bill [ANALYSIS]
Nationwide issues scam alert as Britons targeted by ‘cash trapping’ [WARNING]

“Currently, eligible employees working full-time on the NLW will have a total pension contribution of £798 per year. 

“This will increase to £884 meaning they will have an additional £86 going into their pension over the course of the year. 

“While this might not seem a lot, even a small increase today with compound investment growth over many years will prove very beneficial to future retirement savings, especially for those just starting out in their careers.”

But what is auto-enrolment, and who is eligible for it?

All employers are required by law to provide a workplace pension scheme in a process known as auto-enrolment.

An employer must automatically enrol their worker into a pension scheme, and make contributions towards that scheme if a person meets certain criteria.

These are:

  • A person is classified as a worker
  • A person is aged between 22 and state pension age
  • A person earns at least £10,000 per year
  • A person usually works in the UK

However, it is worth noting employers do not have to contribute to a person’s pension if they earn these amounts or less:

  • £520 per month
  • £120 per week
  • £480 over four weeks

What is happening where you live? Find out by adding your postcode or visit InYourArea

Employers cannot encourage or force their workers to opt out of a workplace pension, nor can they unfairly dismiss or discriminate against a person for being in a workplace pension scheme.

Commenting on the National Living Wage increase, Bryan Sanderson, Chair of the Low Pay Commission, said: “The rates we recommended will put money in the pockets of care-workers, food distributors and many other groups of the lowest-paid members of our society up and down the UK.

“Many of them have made a vital contribution during the last few difficult months.

“The pandemic has been an exceptionally difficulty period for businesses and workers alike, but the labour market has recovered strongly and the economy is expected to continue to grow over the next year. This is attributable in no small part to comprehensive Government support.

“Our value as a social partnership is to find a consensus recommendation acceptable to both sides of industry.”

Source: Read Full Article