Most Defined Contribution pension schemes work on the basis that you will put in some money and your employer will top this up.
Some schemes are more generous than others. For example, your employer may match your pension contributions, up to 10% of your annual salary. This means if you pay in £100, your employer will add another £100, effectively doubling your money immediately.
It’s worth checking if you are getting the most out of your scheme. If you are putting in less than the maximum match your employer will make, then you are effectively leaving free money on the table. Money that, given the tax-relief and ‘snowball effect’ we discussed earlier, could be the difference as to whether you hit your number or not.
That said, many people will feel this reduces their take-home pay. Technically yes, but your pension is the single most effective and efficient way of saving for your future.
People in this position should strongly consider where they can make savings elsewhere in their spending, to be able to increase their pension contributions. Even doing this by just 1% each year until you reach your employers’ maximum contribution, will make an incredible difference.
The £50 a month you save on takeaways now, after employer contributions, tax-relief and compounding over decades, could be worth tens of thousands of pounds by the time you retire.