The expert called for the current system to be expanded
The expert called for the current system to be expanded
Martin Lewis has outlined some pension rules that everyone should understand. The money-saving expert discussed several essential financial and lifestyle principles during a recent episode of his BBC podcast.
The programme included valuable guidance from the consumer champion alongside suggestions submitted by fans of the show. One listener encouraged people to begin contributing towards their pension from as early as 18 years of age. Mr Lewis said he “totally agrees” with this principle of starting to build your pension pot from a young age. He went on to clarify several important rules about how the pension system works.
Mr Lewis said: “We have auto enrolment in this country that means if you are an employee and you’re earning over £10,000, you will automatically be contributing to a pension and your employer will have to match to an extent those contributions. You put five percent in, they put three percent in.”
The automatic enrolment rules dictate that people between 22 and state pension age – presently 66 – earning a minimum of £10,000 annually must be enrolled by their employer into a workplace pension scheme.
At least eight percent of your salary must be paid into the fund. Typically, this comprises five percent from the worker and a corresponding three percent from the company.
These proportions may differ provided the mandatory eight percent total is met. Workers also have the option to contribute additional amounts beyond the baseline requirement.
As the topic of pension contributions at 18 had been mentioned, Mr Lewis pointed out another aspect of the auto enrolment rules. He said: “If you are 18 and you are earning over roughly £6,500, you are not opted into a pension but if you do opt in, your employer still has to do the matching contributions.”
Anyone earning above £6,240 annually can choose to begin contributing to a workplace pension scheme, which obligates their employer to make corresponding contributions. Workers aged between 16 and 74 are eligible to take advantage of this provision.
Mr Lewis also voiced his opinion that the current framework should be broadened. He said: “I actually think we should pre-extend the rules, because auto enrolment starts at 22.
“I think the earlier you start putting money into your pension, the longer it has to compound.” There has been growing pressure to widen auto enrolment eligibility to include those aged 18 and above, and to include workers with any amount of earnings.
In a 2024 response to an MP question about this, the Labour government indicated: “We will consider if and when to make changes to auto enrolment, balancing the need for improved pension outcomes with the effects on businesses.”
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- Martin Lewis
- DWP
