The expert called for the current system to be expanded
Martin Lewis has outlined some key pension rules that everyone needs to know. The financial expert shared some essential financial and general life principles during a recent episode of his BBC podcast. The programme included some words of wisdom from the consumer champion as well as some tips suggested by listeners.
One listener encouraged people to begin contributing to their pension early in life, starting from 18 years old. Mr Lewis said he “totally agrees” with this approach of building your pension fund from a young age. He also outlined some fundamental rules to understand regarding how pensions work.
Mr Lewis explained: “We have auto enrolment in this country that means if you are an employee and you’re earning over £10,000, you will automatically be contributing to a pension and your employer will have to match to an extent those contributions.
“You put five percent in, they put three percent in.” The auto enrolment framework means that if you’re aged between 22 and the state pension age, which is presently 66, and you earn at least £10,000 annually, your employer must enrol you into a workplace pension scheme. A minimum of eight percent of your earnings must be paid into the scheme.
This can comprise five percent from the employee and a corresponding three percent from the employer. These figures can differ provided the minimum eight percent total is achieved.
You can also opt to contribute more beyond the minimum total. As the topic of pension contributions at 18 had been mentioned, Mr Lewis spoke about another aspect of the auto-enrolment rules.
He said: “If you are 18 and you are earning over roughly £6,500, you are not opted into a pension but if you do opt in, your employer still has to do the matching contributions.” If you earn more than £6,240 annually, you can choose to begin contributing to a workplace pension, which means your employer must also make contributions.
This applies to any worker aged between 16 and 74. Mr Lewis also expressed his view that the regulations should be broadened.
He said: “I actually think we should pre-extend the rules, because auto enrolment starts at 22. I think the earlier you start putting money into your pension, the longer it has to compound.” There have been growing demands to expand auto-enrolment to cover employees aged 18 and above, and to include workers with any amount of earnings.
In a 2024 response to a parliamentary question on the matter, the Labour Government said: “We will consider if and when to make changes to auto enrolment, balancing the need for improved pension outcomes with the effects on businesses.”
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