It pays to stay in pensions
I am now more than halfway to the traditional retirement age of 65, but I know unless I win the lottery or receive a major windfall, I am likely to be working well past that.
A few days ago, I made the mistake of working out how much I had contributed into my company pension scheme since I joined seven years ago.
As my fiancée and I look to save for a bigger home, that money could come in useful, as she often reminds me after she stopped paying into a pension a few years ago when she changed jobs.
But after thinking about leaving it, I realised the scheme is a fairly decent deal compared to other saving schemes and decided to stay.
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This kind of thinking is what lies behind the Government's move to automatically enrol millions of workers into company pensions.
People can opt out of the scheme, which began yesterday, but the view is the majority won't. Under the new system, a slice of a worker's pay packet will automatically be diverted to a pension pot, assuming they are aged over 22 and not already part of a workplace pension scheme.
At first, this will only amount to a minimum of 0.8 per cent of their pensionable earnings.
Their employer will, by law, be obliged to add the equivalent of 1 per cent of their employee's earnings to the pot. Tax relief adds another 0.2 per cent.
Eventually, these minimum contributions will rise to 4 per cent from the employee, 3 per cent from their employer and 1 per cent in tax relief: a total of 8 per cent. The Government says that automatic enrolment is vital as workers should not rely solely on the state pension when they retire, especially as life expectancy increases.
Building your own pension pot over your working life should come natural, it says.
But for someone on a basic wage, just how attractive is that crock of gold at the end of rainbow?
When the full 8 per cent contribution rate is in effect, someone earning £20,000 a year would see £1,154.88 in combined contributions being added to their pot each year.
If they were aged 22, and then saved for 40 years before retiring at the age of 62, these contributions would eventually total £46,160.
According to experts, current historically low annuity rates would leave them with a pension £3,441 year, or £287 a month. A welcome addition to a basic state pension, but certainly not enough to retire to Spain.
Meanwhile, I'm sure we won't have to wait too long for the next quadruple lotto rollover.
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