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When you reach the age of retirement and you are no longer able to work and earn an income, you have the option of either enjoying your pension in relaxation, or depending on a personal loan if you don’t have access to a pension or have not saved enough money for retirement.
If you are someone who is not covered by a traditional pension plan or have not done much to save for your retirement, there is still hope.
The UK government introduced the auto-enrolment pension scheme to enable UK workers benefit from a fruitful pension scheme. It is especially designed to take care of the retirement of low earners. The scheme was introduced because it was noticed that a lot of employees were not actively planning towards their retirement and thus putting themselves in a financially risky situation.
How It Works
Under this scheme, both employees and employers are automatically registered to contribute about 1% (for now) of their gross earnings. This figure is expected to increase to 4% from the employer and 4% from the employee by late 2018.
Many people are ill-advisedly choosing to opt out of the auto enrolment scheme because they feel it’s shortening their already little pay, and that it’s a sacrifice they cannot afford to make. But every good thing comes at a price.
Ignoring the initial discomfort of being part of this pension scheme, let’s consider the apparent benefits that you might miss out on if you choose to opt out.
- Firstly, the auto enrolment process takes away the hassle of you having to find, research, and then sign up for a beneficial pension scheme. All the hard work is already done for you, and will continue to be done for you as your contribution to your pension is automatically deducted as at when due.
- Secondly, it’s not just you contributing to securing your future but also your employer. This makes this particular scheme especially attractive because employers who were previously welshing out on contributing to employee’s pension funds are now mandated by law to pay.
- By being auto enrolled, you are on track to living and being able to afford the sort of lifestyle you’ve dreamed of for enjoying your retirement.
- You no longer have to rely solely on the questionable State Pension to cover your retirement.
While being part of the auto enrolment scheme can prove to be a great thing for a lot of people, there are some who stand to benefit very little from it. Example of such individuals are older workers who are already close to retirement. Such employees will not be able to work for much longer and thus their pension savings from auto enrolment will not amount to much. But younger employees can expect to benefit greatly from the scheme.
But regardless of your age, this scheme is better than nothing. Even if you are older and can only save a little bit of money for retirement, it is better than nothing. Having something saved will open the door and give you some additional options. It might not be the best thing in the world, but it is better than the alternative.
So regardless of age or how much you are struggling to get by in the moment, do not make the mistake of opting out. Having an income that is 1% less than what you have now shouldn’t have that large of an impact on your finances. And with the ability for your savings to grow over time, you will come out ahead in the long run.