Martin Lewis shares how Britons can double or triple their money with easy pension change | Personal Finance | Finance
The financial journalist shared the information during a special episode on his hit ITV programme, The Martin Lewis Money Show, on February 17, 2021 (Thursday).
Specifically, Mr Lewis discussed how workplace pension schemes operate and why it is vital that savers check to change their policy in order to make easy money.
He explained that when someone puts away an amount of money into their retirement pot, they pay less tax than what has been saved into the pension and their employer matches that amount.
For example, if someone is a basic rate taxpayer who loses 20 percent of their income to tax, and they place £100 in their pension, their boss would put another £60 into the pot.
Usually, the average taxpayer would only get to keep £80 out of every £100 they earn because £20 would be taxed.
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In comparison, a higher rate taxpayer would only keep £60 out of every £100 over the higher rate threshold.
However, due to employers matching this amount and it being not subject to income tax, Britons could see their money almost double or triple if they are enrolled in the workplace scheme.
On this issue, Martin Lewis said: “In effect, you lose £80 in your pay packet but you get double that – £160 – going into your pension.
“For a higher rate taxpayer it costs you £60 and you get £160, nearly treble going into your pension.
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“This is unbeatable – there’s nothing out there like it which is why my big message is, opt out and you’re effectively giving up a pay rise and you’re giving up the tax benefits too.
“Of course you’re going to take home less but what you get in the pension return is so good, so don’t opt out unless you absolutely have to.
“For those people who have not automatically been opted in, many can and some of you should choose to, because your employer must let you join and it must contribute if you’re aged between 16 and 74 and you earn over £6,742.
Taxpayers should take the age they started their pension, divide it by two and then put that percentage in for the rest of your life.
For example, if someone started their retirement pot at the age of 22, they should place 11 percent of their earnings in it.
“Nobody gets close to that but the big thing about that equation is that the earlier you start the better,” Martin Lewis explained.
“Eight percent isn’t quite up to the equation but put in what you can, max this out.”
