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Millions of workers who are auto-enrolled into pensions will see deductions from wages increase when they receive their April wage slip. On 6 April 2018, employers must have increased the amount of their minimum contributions into their staff’s automatic enrolment pension to at least 2% of qualifying earnings. Staff members will have to make up whatever shortfall remains of the new total minimum contribution up to 5%, including the employer’s contribution.
The minimum contribution levels will rise again on 6 April 2019, with the employer paying a minimum of 3% towards the pension, and the total minimum contribution reaching 8% – with the member of staff making up the rest.
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.
Further information on the changes can be found here
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