Although you have the option to opt out of your workplace pension, it’s a really good idea to stay and pay into it. Because your employer and the government both pay into your workplace pension, you essentially get ‘free money’ that is invested for your future.

Your employer is obliged to contribute an amount that is equal to a percentage of your earnings. Usually, this is done on the basis of ‘qualifying earnings’, which are your earnings between £6,240 and £50,000. Currently, an employer must contribute at least 3% and you must contribute the rest to make a minimum overall contribution of 8%. You will also get tax relief on your contributions, which means the government is also contributing to your pension.

Over the years that you’re working, that money will be invested. Although there can be fluctuations in the investment market, over a long period of time your money will grow. £1000 held in cash since 1925 would now, due to inflation, be worth £85,000. However, if invested in a mixture of shares and loans (as pensions usually are), it would be worth £1.9 million.

Putting your money into your pension is a great way to grow it so you have more to live on when you retire. For most people, the State Pension (currently £168.60/week) is not enough to pay for the lifestyle they want. That’s why it’s a good idea to have extra savings on top.

Did this answer your question?