Britons missing out on £30,000 boost to pension over lifetime – are you?

    45
    0


    The agreement involves people voluntarily lowering their wage to avoid paying taxes on it. This means that their employer can pay the full amount – including what would otherwise have been taxed – into their employee’s pension.

    An agreement like this is called “salary exchange” and many are unaware of it even though it could boost their pension by thousands of pounds.

    It is sometimes also referred to, misleadingly, as salary sacrifice.

    Keith Humphrey, CEO of Workplace Pensions Direct, has set the record straight and made clear that there is no “sacrifice” involved in an agreement like this.

    “There is only upside”, he said.

    “For a 30-year-old planning to retire at the age of 68 and earning an average of £29,600 a year the difference this can make is in excess of £30,500 over their life.

    READ MORE: Pension relief at source: HMRC warns returns remain outstanding

    Indeed, he says, more agreements like this are “badly needed” as there is no cost involved for either employer or employee.

    Research conducted by Workplace Pensions Direct and YouGov has shown that only half of British businesses are utilising this strategy, meaning that as many as 15 million people are missing out.

    “In this situation I believe the employer has a moral responsibility to help their employee in any way they can, if they don’t then I fear for future generations,” Mr Humphrey said.

    “Add to this the fact that forecasted returns on pensions have fallen – meaning that workers must now contribute 50 percent more to achieve the same predicted pay out compared to a decade ago.”

    There is much to be positive about in the data available, however, as it shows that “50 percent of British businesses are being extremely savvy when it comes to salary exchange for pensions”.

    The data also showed a generational disparity in terms of taking advantage of salary exchange, as 60 percent of financial decision-makers under-35 are rolling out a scheme compared to only 41 percent of over-55s.

    “By entering into this you could increase pension contribution by 0.5 to one percent of your salary – why wouldn’t you do that? There’s really no reason not to.”

    While many employers perceive a lack of clear financial benefit from the salary exchange tactic, Workplace Pensions Direct has been using it to make a big difference to businesses.



    Previous articleChrissy Teigen goes to therapy twice a week, posts pic from Obama bash
    Next articleDaniil Medvedev ready for possible Rafael Nadal battle with confident prediction

    LEAVE A REPLY

    Please enter your comment!
    Please enter your name here