‘It’s free money’ – Britons can boost pension pots with one ‘simple question’
Martin Lewis explains benefits of workplace pension
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The reality is, most people in work are already invested into pension due to auto enrolment, but the benefits it brings can be greater if people just ask the one “simple question”. Express.co.uk spoke with investment expert Peter Komolafe about how people can boost their pension pots by taking more of an interest in their workplace pensions.
A workplace pension is a way of saving for one’s retirement that’s arranged by their employer.
Under the Auto Enrolment legislation, employers and employees have to pay into it.
Contributions are taken directly from someone’s wages and paid into their pension.
Their employer also adds money to the pension and the Government add their own contribution in the form of tax relief.
The amount of relief given depends on the income tax bracket one is in.
So, if Britons are a basic rate taxpayer, they can get a tax top up of 25 percent on your pension contributions, up to an annual limit.
When thinking of retirement, Peter explained that many people may not know that they have invested this way.
He said: “Most people are already invested via their workplace scheme but don’t know.
“Effectively it’s free money as your employer has to contribute on your behalf.
“Try and make sure you can maximise what you can get.
“Ask the simple question, ‘Does your company match your contributions?’
“So, if you’re paying in the minimum five percent, they will be paying in the minimum three percent.
“But a lot of companies will say if you pay in eight percent, we will match this and also pay in eight percent, so you have the opportunity to get some free money.”
Those in their 30s and 40s especially have time to make “a lot of money” in their pension.
Peter discussed the importance of knowing exactly what one’s workplace pension scheme is invested into to boost pension pots.
He said: “People wanting to make the most of their pensions should make sure they’re invested in something that will work as hard as possible for them.
“If you don’t know what your workplace scheme is all about, and what type of funds you are invested in, the first thing you should be doing is speaking to your HR team to know what you’re invested in to.”
Most people in employment should have access to a workplace pension and should be already automatically enrolled.
The government introduced Auto Enrolment in 2012 to help more people save for their retirement so people begin paying into their pensions as soon as they receive the required salary.
Employers must contribute a minimum amount; in most cases this is three percent.
But Peter encouraged Britons to ask their employers if it is possible at all to increase their contributions to really maximise their pots for the future.
He concluded: “For retirement purposes I think you need to utilise your workplace scheme to the best of your ability.
“Workplaces should have a bit of responsibility to be clear on these things because it’s not everyday knowledge.
“But ultimately the big thing here is that you may be able to save more which your future self will thank you for.”
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