Blick Rothenberg

Increase in deductions for pensions means a decrease in take home pay for many

05.04.2018

‘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 Blick Rothenberg.

‘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 Blick Rothenberg.
 
‘On April 6th this year a relatively modest 0.8% deduction from workers’ pay packets into their auto-enrolment pensions is set to increase to 2.4%, with an additional rise to 4% to come into effect in April 2019,’ said Rebecca.
 
Employers’ contributions are also set to increase from 1% to 2% of qualifying earnings with a further increase to 3% from April 2019 onwards.
 
Rebecca 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.’

‘The Bank of England forecasts wage growth this year and with a rise in the income tax threshold this should boost spending and put more cash in workers’ pockets. However, the increase in monthly auto-enrolment pension contributions may result in a decrease in take home pay for some workers.’
 
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.’

For more information, please contact Rebecca Goldring.