On the day that we learn that pension scheme membership is falling, I’ve bucked the trend and actually started making my own contributions into the company pension scheme.
The company has been paying in 6% of my salary on my behalf for the past few years, but I’ve only recently signed the forms to start making my own contributions, via salary sacrifice, which is a way of boosting the amount that is paid in to a pension and reducing National Insurance payments by both employees and employers, whilst also reducing your gross “take home” pay. Once seen as a tax loophole, it is now a pretty widespread tactic.
There’s actually a few angles to today’s news on pensions. Firstly, it’s final salary pension schemes in the private sector that are seeing a declining number of contributors (mine’s a private sector money purchase scheme).
Membership of final salary schemes in the public sector actually rose, which isn’t that surprising – if I was given the chance to get into a final salary scheme I’d be in it like a shot, as they won’t be around forever. Overall pension scheme membership has slipped by 400,000 in the past 2 years, which isn’t the way the numbers should be moving.
Average contributions from staff in money purchase schemes are also falling – from 3% to 2.6% last year, although employer contributions rose from 5.9% to 6.4%.Â
I’ve been meaning to start making pension contributions for a while, but only organised it a few weeks ago – had I left it a few more weeks I’m not sure I would have committed to it given the way things are in the financial industry. The 8% now going into my pension would probably be better spent buying redundancy insurance and paying off debt. One silver lining is that I’ve started investing when the markets are low, which will hopefully mean a larger pension pot for me when I come to retire in about 40 years time!
photo credit: A Touch of Glass