With the new tax year in full swing, Stuart Price, Partner and Actuary at pension experts Quantum Advisory, looks at what we can expect over the next 12 months.
Stuart, based at Quantum’s Cardiff head office, says: “One of, if not the, biggest change to come into force this April is the increased minimum pension contribution rates for automatic enrolment. Rising from 2% to 5%, with the employee contributing 3% of this, all those enrolled and who currently pay the minimum rate, along with their employers, will notice a significant impact on their monthly outgoings.
“However, the impact on employees’ take-home pay will be less noticeable as changes to the personal tax allowance and National Insurance (NI) primary threshold are increasing. The annual personal tax allowance has gone up from £11,500 to £11,850, while the weekly NI primary threshold is now £162, up from £157. This means the increase in pension payments will be somewhat offset by the reductions in tax and NI. Following a survey, the People’s Pension has also found that one in five employers actually pay more than their minimum 2% contribution so employees working for these employers will see even less of an effect on their pay.
“Taking all this into account, will we see more people opting out? It seems not. According to a recent survey from Now Pensions, even with the increase in employee contribution rates around 85% of employees said they would remain in their auto enrolment pension scheme – a figure I’m sure the government will be satisfied with.
“Good news too for those either already retired or set to retire soon as the state pension has increased this month due to the triple lock guarantee – which guarantees that the state pension will rise by the highest of either 2.5%, the rate of inflation or average earnings growth. As September’s CPI inflation figure of 3% was the highest, this is how much the state pension has increased by – from £159.55 to £164.35 a week.”
Stuart Price, Partner and Actuary at Quantum