Millions of workers who are auto-enrolled into pensions will see deductions from wages triple when they receive their April wage slip, says Rebecca Goldring, a tax manager at leading accounting, tax and advisory practice Blick Rothenberg.
“On April 6 a relatively modest 0.8% deduction from workers’ pay packets into their auto-enrolment pensions increased to 2.4%, with an additional rise to 4% to come into effect in April 2019,” said Goldring.
Employers’ contributions also increased from 1% to 2% of qualifying earnings with a further increase to 3% from April 2019 onwards.
Goldring said: “With reports that almost one in eight British individuals set to retire in 2018 will rely solely upon the state pension for income, the government is trying to change the status quo by gently introducing workers’ into saving for their retirement. However, for many this increase will feel like a harsh jolt.”
She added: “Owing to the squeeze on consumers and the continuing difficulty for people to get on the housing ladder we may find many, particularly the younger generation, choosing to opt out of the pension in favour of saving for a house deposit or to keep up with living costs.
“Those who do decide to opt out will, however, unfortunately forfeit the employer contributions, tax relief from the Government and any increase in the value of their pension that could be built up through investment growth over their working life.”