Pensions Scheme Changes Arriving in 2018 – How Are You Affected?

Published: 21/02/2018 and written by Patrick Smith

Pensions Scheme Changes Arriving in 2018 – How Are You Affected?
Preparing for retirement is now more important than ever with the current uncertainty around the future of the economy. While saving into a pension pot seems to be the simplest way forward (with the introduction of auto-enrolment back in 2012) there are also many other ways to ensure you have a secure safety net when it comes to retiring. Mr Lender had a look at some of the ways you can build up pensions, as well as changes to the auto-enrolment scheme coming this year which you need to know about.

pensions 2018

Auto-enrolment

From 6th April 2018, increases to workplace pension contributions could mean you will end up paying three times more towards your pension each month. Currently, the law states employers must contribute the equivalent of 1% of an employee’s salary into a pension, and individuals must add an additional 1% – unless they choose to opt out of the pension scheme. After the changes come into play in April, employer contributions will increase to 2% and individual contributions will increase to 3%.

It’s quite likely that such a large increase in pensions contributions after the change will be noticeable, however it isn’t the last time they will increase. From April 2019 they’ll increase again to a minimum combined contribution of 8% – individual contributions will rise to 5% while employer contributions will increase to 3%. Of course, this is just the minimum contributions and an employer or individual can add more if they wish.

You may also be fortunate enough to have an employer willing to pay more than the minimum contributions, which will mean that your individual contributions could be less than the stated minimum. As the total combined minimum contributions need to be 5% from April 2018, your employer could contribute the total 5% meaning you won’t need to part with any of your wages if you don’t want to. Alternatively, your employer may choose to pay more than the minimum 2% but less than the combined contributions total – say 4% for example – and you will only need to make up the shortfall, meaning your contributions would be just 1% in this instance.

Of course, saving into a pension pot is entirely optional, and you can opt out at any time if you want. Many people are even beginning to suggest that saving into a pension pot is now a thing of the past and there are other, more rewarding ways to save for retirement instead.

Investing

Investing your cash in other ways is said to be one of the best ways to raise enough money for retirement. Bitcoins and other forms of cryptocurrency are just one of many ways to invest now, with a few hundred pounds said to bring in an investment of much more than that in the long run. Other long term forms of investment worth looking into include ISA savings accounts, stock markets, and property. However, it’s always best to research before committing any of your money to an investment opportunity. Any sort of investment is risky, though some are certainly riskier than others.

The Pensions Dashboard

Whether you choose to invest your money for your future or opt in to a pension plan, it’s important to keep track of where your funds are. If you do choose to keep your money in a pension pot, keep a note of who your pension provider is and any further details to help keep track of your money – such as the date you first began investing. If you have saved into multiple pension pots over the years, make a note of each one and keep all your pension information safe in one place. While it may seem longwinded and complicated at the moment, the Pensions Dashboard set for release in 2019 will make it far easier for you to keep track of your pensions. With an estimated £400million in unclaimed pensions, the foundations were laid in 2016 for the Pensions Dashboard to help more people avoid missing out on unclaimed pensions.

Spend some time looking into all the available options and consider how much you have to spare each month to put towards a retirement savings plan. Whether you’re just at the start of your career journey or you’re nearing retirement, it’s never too late to start thinking about your pension.

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