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Workplace pension savings

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Employees contribute higher pension payments

On 6 April 2019, the minimum level of auto-enrolment contributions increased to 8% of earnings, made up of 3% from employers and 5% from employees. According to data from the Pensions Regulator, auto-enrolment has brought a total of 9,937,000 people into the scheme to date, and involved 1,400,918 employers.

By making workplace pension saving the default option, it’s helped more employees save towards retirement where previously they might not have had access to a workplace scheme. Qualifying earnings include salary, wages, overtime, bonuses and commission, statutory sick pay, and any statutory pay received during paternity, maternity or any other kind of family leave.

Compound growth over the years

Employees aged 22 and over, who earn more than £10,000 a year and who were not already in a company pension scheme, have been automatically enrolled into saving for old age through the scheme which began in 2012. More will be enrolled in the future as they start work or new jobs. This latest change marks the final increase in contribution rates designed under the scheme.

It can often seem daunting, and sometimes quite futile, to be putting away little bits of money each month that you can’t touch for decades – particularly if you’re just starting out in your career. The fact of the matter is that the earlier you start, the more you’ll have in retirement. Your pension pot is invested, so it benefits from compound growth over the years. This means that the more you have in the pot early on, the bigger it is likely to grow.

There are three key levels to be aware of:

The Earnings Threshold

This is the trigger level of earnings which brings a ‘worker’ into auto-enrolment. It used to match the personal allowance, but since 2015/16 has been frozen at £10,000. That round number will stay in place during this current tax year.

The Qualifying Earnings Lower Limit

This is the floor level of earnings above which contributions are payable, but only if the earnings threshold is triggered. It matches the lower earnings limit, which is a key level for social security benefit entitlement and is £6,136 (£118 a week) in 2019/20.

The Qualifying Earnings Upper Limit

This is the upper level of earnings on which contributions are payable, currently £50,000. For Scottish taxpayers, the higher rate (41%, not 40%) threshold for earned income is set at £43,430 in 2019/20.

The future of your wealth

We’ll help you understand the choices available to you whether you are just setting out on your career path or approaching retirement. To discuss which options will work best for your retirement needs, please contact Reeves Financial on 01403 333145 or email areeves@reevesfinancial.co.uk.

INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

This is for your general information and use only and is not intended to address your particular requirements. The content should not be relied upon in its entirety and shall not be deemed to be, or constitute, advice. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation. For Reeves Financial, published by Goldmine Media Limited, Basepoint Innovation Centre, 110 Butterfield, Great Marlings, Luton, Bedfordshire LU2 8DL Content copyright protected by Goldmine Media Limited 2017. Unauthorised duplication or distribution is strictly forbidden.

Adam Reeves

Author: Adam Reeves

DipPFS Cert CII (MP&ER)
Independent Financial Planner, Wealth Manager, Director

Last updated on

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Adam and his team undertook in-depth research into our existing QROPS schemes and clearly set out both pros and cons of transferring the funds back to the UK. Having decided to go ahead with the transfer, Adam and his team worked extremely hard to facilitate the transfer. The QROPS pension trustees were not always the most professional or responsive organisation – however we were very grateful for the perseverance and commitment that Adam showed us as clients.

Jonathan – East Sussex

Adam offered a range of financial products , the one he suggested was affordable and proved to be a good choice.  Returns on investments have exceeded my expectations, based on Adam’s advice and guidance. Profits have enabled house improvements to take place.

David - Surrey

Adam arranged an appointment very timely, he explained his role and qualifications as an IFA giving me reassurance , we went through my retirement and investment goals. Adam discussed my options explaining in great detail, I felt relaxed during our discussions allowing me to fully understand my choices. I feel very confident in the financial advice allowing me to enjoy my retirement.

I was very happy with Adam’s recommendations and explanations of financial products which would suit my retirement goals, I feel this has helped me review and reduce my financial risk as I reach retirement, leaving me feeling confident that I can enjoy my retirement plans.

Ron – West Sussex

After initial meeting Adam put together a very detailed and thorough written plan. At our second meeting he went through the whole booklet and explained everything in layman’s terms which made it a lot easier to understand.

I am very happy with everything that was suggested and put in place especially with something as big and important as pensions. Adam and his team have taken a huge weight off my shoulders and I would highly recommend their services to anyone needing help with their financial planning and pension.  Adam couldn’t have been more helpful, and even came outside his normal area to meet me on a number of occasions.

Richard - Kent

Unfortunately I had to claim on my critical illness insurance due to my wife being ill and because of the sound advice Adam gave in acquiring this insurance we ended up being financially safe through a tough time.

Steve - Kent

Adam did a review of our financial situation, confirmed that Flexible Drawdown best suited our needs as a family, and then did all the research into the best product for us. He will continue to monitor it for me. He acted extremely promptly because we had a deadline for requiring the lump sum; went out of his way arranging meetings during non-office hours, was professional yet friendly and explained a difficult subject very well.

Clare – East Sussex

Adam did a thorough review of my pension policies, clearly explained how well they had performed, how flexible they were, how the market regulation has changed, and, crucially, what the tax implications would be if I were to leave them untouched. He accurately assessed my attitude to risk and recommended an up-to-date solution that will offer me the greatest flexibility at retirement.

Greg – East Sussex

Adam was quick to assess & understand my situation, and was able to discuss & communicate in a very concise and simple way the various options available to me, taking time for me to understand and clarify where necessary. My understanding & knowledge of taxation & pensions has increased significantly allowing me to feel much happier making financial decisions for the future.

Rob – West Sussex
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