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.
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