Martin Lewis is urging people to check their workplace pension as you could “double or triple” your money over the years.
Speaking on his ITV show, in a special pensions episode of his financial advice programme, Martin handed out some critical money advice.
The money guru outlined how private workplace pension schemes work and that everyone should check and change their policy with work right now for easy gains, reports Yorkshire Live.
He explained that every time you put money into the pension pot, you actually pay less tax on what’s saved into the pension and your employer will match the amount.
So if you’re a basic rate taxpayer losing 20% of their income to tax, and you put £100 in, you get another £60 from your employer.
Normally you would only keep £80 out of every £100 you earn because £20 would be taxed. For a higher rate taxpayer, you only keep £60 out of every £100 over the higher rate threshold.
But because the money is matched by the employer AND it isn’t subject to income tax, you stand to almost double or triple your money by making sure you’re enrolled in the workplace scheme.
Martin 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.
“This is unbeatable – there’s nowt out there like it which is why my big message is, opt out and you’re effectively giving up a payrise 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.
“Let’s imagine there’s a 21-year-old living at home with no expenses it’s a dream time to start your pension.
“Just cos you’re not opted in just ask to join.”
Martin then explained the amount of your income you should put in your pension.
He said you should take the age you started your pension, divide it by two and then put that percentage in for the rest of your life.
So if you started at 22 you should put 11% of your earnings in.
“Nobody gets close to that but the big thing about that equation it shows the earlier you start the better. 8% isn’t quite up to the equation but put in what you can, max this out.”