People who earn over £6,240 issued urgent pension warning

James Rodger
·2-min read
People who earn over £6,240 issued urgent pension warning
-Credit: (Image: Reach Publishing Services Limited)


People who earn £6,240 or more have been issued a pension warning from experts. Auto-enrolment into pensions starts at 22, but if you are younger than that and earn £6,240 or more a year (in the current tax year), you have the right to opt into your employer’s scheme.

At a time where pension pots are crucial amid the Cost of Living crisis, young workers have been urged to consider starting enrolment early. Sir Steve Webb, the former pensions minister with the Liberal Democrats, is among those to make the calls.

Your employer must make payments worth at least 3% of your salary. You must put in the equivalent of at least 5% of your pre-tax salary. But many experts say that isn’t enough. Phoenix Insights, a thinktank, says the current 8% total minimum contribution “is too low for most savers to achieve an adequate retirement income, and may be giving some a false sense of security”.

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“You can open a self-invested personal pension (Sipp) for anyone under 18. You can pay a maximum of £2,880 a year into this, which becomes £3,600 through 20% tax relief,” says the financial adviser website Unbiased. “If you are in a workplace pension and haven’t made any special fund choices, you will be paying a maximum of 0.75% in charges [known as the “charge cap”], and often a lot less than this,” Webb said.

“For most people, the certainty of a secure lifetime income from a defined benefit scheme is the best form of retirement provision,” says Webb, who is now a leading partner at a big firm, adding: “This could include cases where there is already enough secure income from other sources [including a spouse or partner], or where the potential for someone to inherit any unspent pension balance on death would be important.”

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