How auto-enrolment increases affect pay packets

The focus now needs to switch to getting people to understand how paying in more personally or improving their investment returns may boost their income or allow early retirement

Auto-enrolment has revolutionised retirement saving in the UK, with employees’ pay packets absorbing all that has been thrown at them so far. April’s contribution hike is yet another hurdle to clear before we can be confident savers are in better retirement health, with the average worker preparing for their spending power to drop £30 every month. From 6 April, minimum staff contributions will increase from 3% to 5%.

Lower take-home pay could put pressure on families, although these higher contributions have the potential to power up your pension by half, so persevering remains pertinent. The scheduled jump in the personal tax-free allowance will also help offset some of this cost.

Only relying on inertia to provide for us in retirement is dangerous. Auto-enrolment is a little like a cheap balloon at a kid’s party. The more you inflate, the better it gets, but at some point it cannot take anymore.

The focus now needs to switch to getting people to understand how paying in more personally or improving their investment returns may boost their income or allow early retirement, rather than forcing them to pay more in automatically.

Nathan Long is senior analyst at Hargreaves Lansdows

Auto-enrolment has revolutionised retirement saving in the UK, with employees’ pay packets absorbing all that has been thrown at them so far. April’s contribution hike is yet another hurdle to clear before we can be confident savers are in better retirement health, with the average worker preparing for their spending power to drop £30 every month. From 6 April, minimum staff contributions will increase from 3% to 5%.

Lower take-home pay could put pressure on families, although these higher contributions have the potential to power up your pension by half, so persevering remains pertinent. The scheduled jump in the personal tax-free allowance will also help offset some of this cost.

Only relying on inertia to provide for us in retirement is dangerous. Auto-enrolment is a little like a cheap balloon at a kid’s party. The more you inflate, the better it gets, but at some point it cannot take anymore.

The focus now needs to switch to getting people to understand how paying in more personally or improving their investment returns may boost their income or allow early retirement, rather than forcing them to pay more in automatically.

Nathan Long is senior analyst at Hargreaves Lansdows

Source: Hargreaves Lansdows

Source: Hargreaves Lansdows

Source: Hargreaves Lansdows

Source: Hargreaves Lansdows

Share this story

More Content

ADVICE

3 Comments Breakfast Club: From offshore oil worker to running an advice firm

Breakfast Club: From offshore oil worker to running an advice firm

Jennifer Ellis runs Wellington Wealth alongside sister Nicola Ellis, emphasising the importance of family and client service

twitter_banner

INVESTMENT