Some could add thousands of pounds to their pensions by seeing if their employer offers an employer match for auto-enrollment pension schemes
Currently, someone earning £25,000 a year who starts saving at the auto-enrollment minimum between the ages of 22 and 65 can accrue a pension pot of more than £383,000, according to data from Hargreaves Lansdown.
Consumers can add thousands of pounds to their pensions by asking their employers to double their contribution under the automatic enrollment scheme, new figures show.
For self-registration, the minimum contributions are currently eight percent, split between five percent by the employee and three percent by the employer.
Many employers adhere to the minimum requirements for auto-enrollment, but some are willing to contribute more, often referred to as an Employer Match.
If an employer were to match someone else’s 5% contribution, they could end up getting £481,000.
Meanwhile, if someone increases their contribution to six per cent and an employer matches that, they could be considering a pension pot close to £580,000.
If they increased their own contribution to six per cent and the employer did so, you would be considering around £580,000.
These are big increases for a relatively small additional contribution.
However, recent research by Hargreaves Lansdown showed that 28 percent of people did not know how much they or their employer contributed to their scheme.
Helen Morrissey, Senior Pensions and Retirement Analyst at Hargreaves Lansdown, said: “There’s no better way to supercharge your pension than to use an Employer Match. Many employers adhere to minimum auto-enrollment requirements, but there are others who are willing to contribute more if you can increase your own contribution.
“For what may be a relatively small increase of your own, you can get a lot of extra money from your employer – and the whole thing is topped up by the government.
“Over time, this can have a big impact on how much you have in retirement. It’s worth checking with your employer to see if they offer a match and making the most of it if possible.”
Increasing your contribution above the auto-enrollment minimum is the best way to improve your future financial resilience.
However, in the current hyper-inflationary environment, finding the extra money can be difficult. So if you can use an Employer Match, it can be a relatively painless way to increase contributions.
Another way to do this is to reconsider your pension contributions every time you get a raise or move to a new job, since you’re essentially using money you never had before. This can really make it easier to increase your contributions.
The figures are based on contributions between the ages of 22 and 65 at eight percent. Starting salary £25,000 increasing by 2% per year and 5% investment growth.
How to find out if your employer is offering to double your contribution
Ms Morrissey, Senior Pensions and Retirement Analyst at Hargreaves Lansdown, said: “Not all employers offer employer contributions on their pension. Some of those who do may communicate this widely, as the additional contributions can prove to be a powerful tool for recruiting and retaining talent.
“However, not all employers say they offer it, so it’s worth checking with your employer to make sure they do. If so, this is a good way to increase your pot.”
It is also worth checking whether your company pension is set up as a salary waiver.
These are popular schemes where you agree to take an amount equal to your pension contribution from your salary and in return the employer pays that amount into your pension.
Because you’re being paid less, you’re paying less income tax and Social Security, and thus keeping more of your net income, but you’ve kept your pension contribution at the same level.
This could be a good way to maintain or even increase your contributions.
“Making a note to increase pension contributions every time you get a raise or a new job is another way to increase your contributions if you can afford it, since you haven’t gotten used to doing that yet to spend extra money so it’s easier to invest in a pension.”