April 2019 sees the third and final increase in contributions planned for your workplace pension.

From this date the minimum contribution required for a workplace pension will increase to 8%.

Your employer will have to contribute at least 3%. (Some employers choose to pay more)

You will have to make up the difference, normally 5%.

Tax relief still applies to workplace pensions, which means that basic rate tax that would be deducted from your pay will be added to the pension too. This makes your contribution effectively 4% of your take-home pay.

There’s several different ways that your salary can be calculated for the purposes of working out these pension contributions but here are a couple of examples. In each case, these examples assume that 100% of your salary is being used for these contributions but you should check the details of your scheme to be sure. Your employer can help.

Note: Sometimes contributions are not based on your whole salary. There are upper and lower limits called (surprisingly) the Lower Earnings Limit (LEL) and the Upper Earnings Limit (UEL). You will need to ask your employer exactly how your scheme contributions are calculated.

The following table is based on an employee aged 25, earning £25,000 per year. Contributions are calculated on full salary.

Contributions NowContributions in AprilChange
Employer (min)2% (£41.67)3% (£62.50)+£20.83
Employee3% (£62.50)5% (£104.17)+£41.67
Total5% (£104.17)8% (£166.67)+£62.50

This might seem like a steep increase but it’s possible that even with this higher amount you are not saving enough for the future. The minimum contributions set by the government take no account of your personal circumstances and your goals.

Talk to us if you would like a conversation that’s about you.

Other rules about scheme membership have not changed. You still need to be aged between 22 and your state pension age, and earning more than £10,000 a year to be enrolled automatically.

You have the right to join the scheme if you are not enrolled automatically enrolled, and you can opt out if you don’t wish to be a member.

Remember, it’s important to save for your retirement. Proper savings give you the freedom to retire on your terms and not just when you can’t work any more. There’s several ways you can save money but pensions are the best long-term product currently available.

If you would like to talk to one of our advisers about your retirement planning, call us on 020 8559 2111 or email us at enquiries@bbifp.com. We’d love to help.