Money expert Martin Lewis is urging anyone who pays into their pension to make sure they ‘double’ or almost ‘treble’ their money.
The Money Saving Expert founder told his ITV The Martin Lewis Show Live viewers how workplace pensions are an ‘unbeatable’ way to ‘double your money’.
Because of the way the workplace pensions system works, and the way they aren’t taxed at the point of contribution, you could make more money the more you earn.
Martin said: “The most important thing to remember is the money you put into your pension is from pre-tax salary. So this is the superpower.
“You get tax relief. So as a basic 20% rate taxpayer, you’re putting £100 in, but of course when you get it in your pay packet 20% is being taken off.
“So to put £100 in only costs you £80. So you’re getting £100 investment for the cost of £80.”
Martin added that for higher rate taxpayers, the gain is even more because you get a £100 investment for just £60, because you don’t lose £40 to tax, and for a 45% rate taxpayer, it costs you just £55 to get £100 invested into your pension tax-free.
Martin added that those in a workplace pension scheme, you will automatically be enrolled in a pension in most cases. As a result, your employer must match your contributions to a certain level.
This is important because in most cases, for every £100 you put in, your employer will add £60 in matched contributions.
Martin continued: “So for a basic rate taxpayer that means you, if you’re putting in £80, you’re getting £160, double the money going into your investment, double your money from what’s coming out your pay packet.
“If you’re a higher rate taxpayer, £60 becomes £160, if you’re a top rate taxpayer – and some people might say it’s unjust they’re the ones that get the biggest but anyway – £55 is nearly being trebled to £160 going into your investments.
“That is just completely unbeatable. So in a way if you were not to do it, you’re giving up a payrise.”
Those who earn over £10,000 will automatically be enrolled, but you can still enrol yourself by opting in if you earn over £6,240.
Those aged under 22 are also not opted in, but it could be worth enrolling yourself if you’re below that age because your money will have more time to grow.
Martin urged his followers to watch his entire Martin Lewis Money Show episode on ITVX for a full rundown on pensions.
