Fundamentally from April 2019 pensions contributions will increase for everyone from everyone. You will contribute more, your employer will contribute more and the government will contribute more.
Who is paying what?
Contributions will vary dependant on the pension scheme rules, however if you’re using the scheme for automatic enrolment there are minimum contributions you must pay.
Since April 2018 minimum contributions that must be paid into the staff’s pension have been 5%. This is split into 2.4% employee contribution, 2% employer contribution and 0.6% as tax relief from the government. Now from April 2019 all those numbers are going up, increasing a fairly large amount. Employees will be paying 4%, employers 3% and the government contribution will rise to 1% tax relief. To put this into simple figures.
- Employee contribution – £24
- Employer contribution – £20
- Government contribution – £6
- Employee contribution – £40
- Employer contribution – £30
- Government contribution – £10
The above are basic rounded figures but your actual contributions will depend on whether you pay a fixed amount or a percentage of your own earnings.
Benefits of the increase
Apart from the obvious that you’re putting more money into your pension pot, along with your employer and the government are contributing more as well. What are benefits of increased contributions?
Firstly, when you retire you are guaranteed an income at the end of it. The more you put in of course the more you will receive at the end and the contributions listed above are only minimum, if you wish you can contribute more. Hopefully your employer will match the contribution you make as well, so essentially double the money for the amount you put into your pension.
Another benefit of a pension is the fact that you can enjoy tax relief on your contributions. In simple terms the governments contribution is the pension provider claim back on the tax paid from your salary e.g. for every £80 you pay into your pension, £100 will go into your pension pot.
If you are unsure and would like some further hands on advice, feel free to call the offices on 0207 993 8661, email us at email@example.com or alternatively come down and visit the offices in Farringdon London.