Workplace pensions – are you in?
Have you ever thought about how much you'll be able to enjoy life when you retire? Possibly not – after all, for many of us, the day when we draw our pensions is still a long way away.
Your later years can be the best of your life. You can take up new hobbies, spend more time with family and even indulge yourself with treats such as extra holidays. But it's a fact of life that to have a good time, you'll have to have enough money. And – no matter how old you are – the time to start thinking about that is NOW.
If you're young or perhaps raising a family, you'll have other things on your mind – nights out, clothes, trips away with mates or childcare for instance. But it really is worth saving at least a little money for the future, because the earlier you start, the more chance you will have of saving enough to have a better time in retirement.
Starting from 1 October, you may find your company will enrol you into a workplace pension scheme. It's all part of a plan to ensure we have enough cash to ensure our future financial security.
Automatic enrolment into a workplace pension means that working people who are currently NOT in such a scheme, and who meet the qualifying criteria, will now be placed in one. Your employer will automatically enrol you – they do all the paper work while you sit back and watch the money build up.
The best news of all is that you actually get extra money. You pay in a bit of your salary and your employer pays in too. You'll also get some tax relief from the government. So it's actually helping you to fund your retirement.
It's a great idea. Of course, pensions can go down as well as up, but for more than 95 per cent of people the expected increase in income is greater than the cost of their contributions plus inflation. Most people will actually get far more than this – the majority of savers can expect to get back more than twice what they put in.
Why is everyone being so generous? That's simple. The UK is facing pensions pressure, so everyone needs to be encouraged to save to build their own future financial security. At the moment, only one in three workers in the private sector are contributing to a workplace pension. And, incredibly, 11 million people aren't putting away enough money to pay for the kind of retirement that they would like.
We're also all living longer. Obviously that's a good thing, but it means that it won't be unusual to be around until your 80s, 90s or even 100s. So the law is changing to encourage us all to save more for our retirement.
And you won't be alone. If your friends and family don't currently have workplace pensions and they qualify, they will almost certainly be enrolled too.
You can opt out if you like, but if you do so, you'll be missing out on an opportunity to help yourself and your retirement. Every time you put money into your workplace pension via Automatic Enrolment, it's invested for you.
If you were to start now, say when you're 35 years old, then the cash you've put in – even if it's just a small amount – could have been invested for 30 years by the time you decide to retire.
Also, it couldn't be easier. Your contributions are deducted automatically from each of your pay packets and your employer has to ensure that they're being invested in a workplace pension scheme that meets minimum government requirements.
You can stop paying in at any time if you feel you need to, but you won't get the employer contribution or the tax relief.
There aren't any complicated forms to fill in and to help you keep a track of your cash, your pension provider will let you know how your investments are performing every year.
Automatic enrolment will be introduced to largest companies first (starting from October 2012) and will then roll out to medium and small-sized companies over the next few years.