Pensions - Articles - Increase in AE contributions cushioned by tax changes


Savers will now be putting away more in their pension pots as part of an increase in auto enrolment minimum contributions from 5% of qualifying earnings to 8%. This means employees will be saving 5% of their income, up from 3%, while their employer will now be contributing 3%, up from 2%.

 While this will reduce take home pay by £302 for those earning £25,000, more than half of that (£159) will be offset by a range of tax changes coming into effect from 6 April.

 
 • National Insurance – The starting point will rise from £8,424 per year to £8,632 which will put another £25 per year into pay packets
 • Income Tax Personal Allowance – This will jump from £11,850 per year to £12,500 which will put another £130 per year into pay packets
 • Qualifying Earnings lower limit – The starting point for pension contributions will increase from £6,032 per year to £6,136 which will put another £4 per year into pay packets
 = £159

 This means almost 53% of the extra pension contributions will be paid for by other tax changes coming into force by the government.

 Meanwhile those on the National Living Wage – a full-time salary of £17,000 – will receive a boost in their next pay packet due to an increase in the minimum wage this week.

 The rise for workers aged 25 and over from £7.83 an hour to £8.21 will see them receive an extra £537 a year. Together with the tax changes they will pocket an additional £696 a year while their extra pensions contributions will reduce their annual take home pay by only £175.

 Adrian Boulding, Director of Policy at NOW: Pensions, comments: “Thanks to these tax changes, when people look at the bottom right hand side of their pay slip in April, they are much less likely to be worried by the increase to their pension contributions.

 “By cushioning the impact, hopefully people will continue to save and resist the siren call of spending. Putting away a little bit more each month will, together with the increased employer contribution, make a big difference to savers’ future retirement prospects.”
  

Back to Index


Similar News to this Story

94 percent view State Pension as an entitlement not benefit
Majority of adults aged 66+ say that Triple Lock is affordable and fair to older generations. Around one in seven rely on the State Pension to provide
Fair play off the pitch
Male players in the English Premier League earn an average of more than £3 million per year, while their female counterparts average around £47,000. T
Why Bitcoin matters to Pension Schemes
Back in November 2024, Cartwright Pension Trusts announced its role in facilitating the first-ever UK DB pension trust investment in Bitcoin. With the

Site Search

Exact   Any  

Latest Actuarial Jobs

Actuarial Login

Email
Password
 Jobseeker    Client
Reminder Logon

APA Sponsors

Actuarial Jobs & News Feeds

Jobs RSS News RSS

WikiActuary

Be the first to contribute to our definitive actuarial reference forum. Built by actuaries for actuaries.