Saving money can be a tricky business. It isn’t easy to put money away without falling prey to bad investments or inflation devaluation or save in a tax-efficient manner.

You might remember a blog we put out discussing pensions as an effective savings option. In it, we talked about how your pension is a great way to both save money for the future and save on your tax bill. Today, we’d like to talk about a related topic – what you can (and maybe should) be putting into your pension, and how an employer needs to contribute into that.

Unless an employee specifically opts out, every employer needs to automatically enrol employees into a Pension Scheme. Employees and employers both have a minimum contribution into this pension. An employee will have to contribute 3% of their annual salary at minimum, with an employer matching an extra 2%. This is set to rise in April 2019 to 5% minimum, with an extra 3% matched by the employer.

The question is, should you be paying more than just the minimum? If you run your own business, the answer could easily be “yes”. Many businesses nowadays offer “pension matching” over the minimum level, where they will match pension contributions like-for-like up to a certain percentage. This can be an effective tactic for a business to recruit and retain employees. If you’re an employee, if your employer is matching it, you are effectively doubling your pension contribution – why not put in as much as you can?

With pension contributions being tax-free, the rise in minimum contributions for both employee and employer could represent a not-insignificant increase in the average person’s lifetime savings. Hopefully, this will make saving up for the future much easier!

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