MILLIONS of workers will see their take-home pay fall when contribution rates for those with auto-enrolment pensions are hiked in six weeks time.
Since 2012, 10 million eligible workers have been automatically signed up to workplace pensions, but from April, their contribution will rise from 3% of their salary to 5%.
The annual take-home pay of workers earning £15,000 will typically be £49 lower, if they pay contributions on their entire salary, while someone on £30,000 will take home £253 less.
The change has led to some commentators dubbing the move ‘auto-enrolmageddon’, with fears that it will lead to workers opting out of their workplace pension scheme en masse.
The government says it will closely monitor what happens.
The rate of people stopping saving into a workplace pension was just 0.7% in the three months following the first increase in contribution rates in April 2018, compared with 0.6% for the previous four years.
Tom McPhail, of Hargreaves Lansdown, said: ‘This is quite a significant increase relative to what they’ve been paying to date.
‘This is going to affect up to 10 million people who’ve been auto-enrolled in the past few years, so the potential impact of this change is quite substantial.’