Pensions - Articles - 3.9% rise in Living Wage boosting pension contributions

"Millions of low workers will benefit from a pay increase from next April. At a time of continuing cost of living pressures, this will bring welcome relief to many, boosting their earning power. Over-21’s will benefit from an increase of just under 4% – taking their hourly wage up to £13.20 from next April. The increase would exceed September’s CPI inflation rate of 3.5% and match the 3.9% uplift in the basic and full new State Pensions under the triple lock next April. This would be a positive step for intergenerational fairness, with low-paid workers and State Pension recipients seeing similar percentage increases in their incomes to help meet living costs. But it falls short of the real Living Wage, which is currently £15.45 an hour in London and £14.10 in the rest of the UK – which many employers have signed up to.

 

 “A hidden benefit is that the increase in the National Living Wage will also have a positive impact on pension contributions, enabling employees to build up larger pension pots for a more secure retirement. As a result of the increase in the National Living Wage, an increase to £13.20 an hour (£24,024 per year) means employees on the National Living Wage will benefit from a total annual pension contribution of at least £1,422.72 a year, made up of their own and their employer’s pension contributions, meaning roughly an additional £71 going into an individual’s pension over the course of a year. Many employees may receive more into their pension if their employer pays higher pension contributions than the auto-enrolment minimum. This may not seem much, but the earlier and longer pension contributions are made, the bigger the likely pension when individuals come to retire."