Workplace Pensions Update

Last week marking the beginning of the new tax year, millions of workers will see their take home pay dip as minimum contributions in auto-enrolment pensions rise from 1% to 3%. Rebecca Goldring, a tax manager at accountancy firm Blick Rothernberg, warned that, "For many, this increase will feel like a harsh jolt". However, others have emphasised that: "Without this jump in contributions, retirement would be unaffordable for many, and an entire lifetime spent working could become the reality."

Nathan Long, a senior analyst at Hargreaves Lansdown, underlined that "Workers can now look forward to retirement with more confidence." The minimum amount paid by employers is also set to rise, from 1% to 2%. In addition, the rates will rise again next April, to 5% for employees and 3% for employers. Workers do have the option of either opting out of a pension altogether, or opting to continue at the old rate, however the latter removes any obligation on the employer to pay in.

Recent reports have found that the proportion of British workers contributing to workplace pension pots rose last year, reaching 73% in 2017 - up from 67% in 2016. Particularly notable was the rise in young savers, up from 31% in 2011 to 73%. However, some remained concerned by the level of contributions made, with head of savings and retirement at Aviva, Alistair McQueen, describing payments as "worryingly low". To be eligible for auto-enrolment, workers must be between 22 and state pension age, earn over £10,000, and ordinarily work in the UK.