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By Emma Wall | 02-23-2018 06:00 PM

Prepare for Changes to Workplace Pensions

The State Pension in the UK is the worst in the developed world - but auto-enrolment may have the answer. As long as scheme members don't opt out

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Emma Wall: It was recently revealed that the U.K. has the worst state pension among developed economies. It's ranked by percentage of national average income paid out in retirement. In the U.K., the retirement income, the State Pension, is just 29% of the national average wage. Top of the table comes the Netherlands, which pays out over 100%, closely followed by Portugal and Italy.

What's the solution to the State Pension problem? Well, potentially, auto-enrolment. Auto-enrolment marked a landmark recently with a million employees having rolled out a pension scheme since auto-enrolment was introduced in 2012.

Auto-enrolment is changing from April, because the minimum contributions are increasing. At the moment, as an employee, as a scheme member, you only have to put in 1% of your wage into the scheme a month. This is changing because the total requirement from April 6th, the new tax year, will be 5%, meaning your contribution could jump from 1% to 3% of your income depending on your employer. You need to make sure that you budgeted for this increase and indeed, for next year's increase from April 2019 with a minimum total contribution across the employee, the employer and the state jumps to 8%.

Do not opt out if you can afford it, because money at this time will accumulate and make a real difference to your income in retirement.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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