During this week’s episode of The Martin Lewis Money Show on ITV, the expert discussed the workplace pension adjustments for over 22-year-olds on a minimum of £10,000 a year.
The changes are due to come into action at the beginning of the new tax year on April 6.
The auto-enrolment workplace pensions currently see your employer having to contribute the minimum of 5% into your pension, while you, the employee, contributes 2% every month.
As of April 6, the total contribution on your employer’s behalf will increase by 3% – seeing it rise to 8%, monthly.
Martin explained: “Wahey, you’re getting a pay rise because your employer is putting more in.”
But it wasn’t all good news, with the money-saving guru pointing out how you will have to contribute an extra 1%.
“The bad news is that there’s less take-home money for you because you’re also having to contribute more,” he added.
“Having said that, at the start of the new tax year, the income tax threshold will increase which means you’ll tend to get more take-home pay anyway which offsets this to an extent.”
To save you from having a “cold baked bean retirement”, which many fear, Martin urges you to not opt out of the scheme unless you have priority payday loans.
He further explains the “power of saving in a pension”, sharing an example with his viewers to simplify the pay rise.
“For somebody on £24,000 a year, roughly the typical salary, 5% is putting in £100 a month of pre-tax money,” he said.
“As a basic 20% taxpayer, you only lose £80 a month, and those who are in a higher tax pay bracket of 40%, you only lose £60 from your pay packet.
“As an investment, it’s unbeatable.”
Just last week, the money expert revealed how to earn money on direct debit energy bills.