Martin Lewis says millions have turned down payrise this year without realising

Martin Lewis
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Renowned money-saving expert Martin Lewis has highlighted that millions of workers have unknowingly declined a pay increase this year. Currently taking some well-deserved time off with his family during half-term, Martin urged employees to understand the potential financial implications of their PAYE pay and pension arrangements.

He detailed how employees are automatically enrolled into their employers' pension schemes due to legislative changes that made workplace pensions 'opt out' instead of 'opt in'. However, those deciding to opt out are effectively leaving money on the table; the employer's contributions are additional income that wouldn't be otherwise earned, reports the Express.

In a statement released via his Money Saving Expert website, Martin issued a cautionary note: "This is a warning for every worker in the UK. Have you turned down a pay rise without realising it? Millions have around 10 per cent of the workforce currently and many others risk doing it, unaware of the consequences. It happens when your employer 'auto-enrols' you into a pension scheme, but you decide to opt out in most cases, a huge mistake."

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Workplace pensions augment state pension entitlements through private pension schemes. Importantly, employers are mandated to contribute to these pensions over and above employee's salaries. According to law, employers are required to 'match' employee pensions. This implies that if you contribute £200 towards your pension fund, your employer will also put in the same amount.

This arrangement grants you an additional £200. Most employers decide their matching contribution based on a percentage of your salary it can be 4 percent, 6 percent, or even up to 12 percent. The statutory minimum contribution stands at 3 percent, ensuring everyone secures at least this rate.

Money expert Martin Lewis explained: "EVERYONE WHO IS OPTED IN EFFECTIVELY GETS A PAY RISE... as your employer is giving you extra money you wouldn't have got otherwise, even though it's not immediately usable."

Although this system diminishes net salary because some funds are directed into a pension pot, it eventually means a higher income upon retirement. Not only will retirees receive their individual contributions, but they will also benefit from the additional funds provided by their employers.

A handy bonus is for those bordering a higher tax category. For instance, if you're just below the 40 percent tax bracket that takes effect for earnings above £50,270, you can choose to invest more into your pension to avert the tax rise.

This would also increase your Personal Savings Allowance and extend other basic rate tax benefits.