Workplace pensions: is there room in your budget?
Published 24 September 2012 by Joel Stanier
With millions of workers to be enrolled on workplace pension schemes over the next few years, it's time to consider how a pension fits into your budget.
On October 1st, around 380,000 people will be enrolled on a workplace pension - as part of a Government drive to ensure more people are saving for their retirement.
Over the next few years, UK workers will be enrolled on a pension scheme unless they opt out - starting with some of the country's biggest companies and working down to the smallest.
It's estimated that 380,000 will be signed up in October, increasing to 420,000 by the end of November and 600,000 by the end of the year.
The automatic enrolment scheme will apply to all workers above the age of 22 who earn more than £8,105 a year.
Contributions will be phased in over time, starting at around 1% of earnings. Eventually, employees will contribute 4% of their earnings to a pension, with the employer contributing 3% and tax relief making up a further 1%.
The scheme will likely be welcomed by many people, especially those who could not be sure that their employer would also contribute. Under the scheme, they will be legally obliged to do so.
But it could also be of some concern to people on a limited budget, especially as other living costs continue to rise.
An expert at thinkmoney commented: "This could be the push many people need to get saving for the future. It's incredibly important that people try to put money aside for this purpose, especially as the population grows. Relying on the state pension simply won't be enough for most people.
"However, it is important for people to consider how this will fit into their budget. Now could be a good time to look at your bank account and identify any areas in which you could easily cut back. It's also worth considering whether your existing savings are earning as much interest as they could be.
"For people who struggle to budget, there are bank accounts and similar services out there that can do it for them. The thinkmoney Current Account is an alternative to a high street bank account and could be the ideal service for somebody who needs help with managing their monthly finances."
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