A rule change brought in with the new tax year means that millions of people will start to save more into their pensions – but thanks to a quirk of the system, an average worker will miss out on £40,000 over their career. Under the final phase of the Government’s flagship savings policy, “automatic enrolment”, the amount put into your pot each month will rise to 8% of earnings.
Except it won’t. The rules state that contributions need to be taken only on a portion or “band” of salary. Both low and high earners are affected. The first £6,136 of income is excluded. And any salary over £50,000 – the new threshold for higher-rate tax – is likewise left out of the calculations. Meanwhile, just days ahead of the changes, more than one in four workers had no idea that their automatic work pension contributions were going to increase.
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