Martin Lewis says millions of people turned down wages this year without realizing it

Renowned money-saving expert Martin Lewis has pointed out that millions of workers have unknowingly turned down a pay rise this year. Currently taking some well-deserved time off with his family during his half term, Martin urged employees to understand the potential financial implications of their PAYE salary and pension arrangements.

He detailed how employees are automatically enrolled in employers’ pension schemes as a result of legislative changes that made workplace pensions “opt out” instead of “opt in”. However, those who decide to opt out are effectively leaving money on the table; employer contributions are additional income that would not otherwise be earned, the Express reports.

In a statement published via his Money Saving Expert website, Martin issued a cautionary note: “This is a warning to every worker in the UK. Have you turned down a raise without realizing it? Millions make up about 10% of the workforce today. and many others risk doing it, not knowing the consequences. It happens when your employer ‘auto-enrolls’ you into a pension scheme but you decide to opt out in most cases, a big mistake.”

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Workplace pensions augment state pension rights through private pension schemes. Importantly, employers are mandated to contribute to these pensions on top of employees’ wages. By law, employers are required to “equalize” employees’ pensions. This means that if you contribute £200 to your pension fund, your employer will also put in the same amount.

This arrangement gives you an extra £200. Most employers decide their matching contribution based on a percentage of your salary, this can be 4%, 6% or even up to 12%. The legal minimum contribution is 3 percent, ensuring that everyone provides at least this rate.

Money expert Martin Lewis explained: “YOU CHOOSE EFFECTIVELY GET A WAGE INCREASE… as your employer gives you extra money you wouldn’t have otherwise, even though it’s not immediately usable.”

Although this system reduces the net salary because some funds are directed to a pension pot, it ultimately means a higher income in retirement. Not only will retirees receive their individual contributions, but they will also benefit from additional funds provided by employers.

A handy bonus is for those bordering on a higher tax bracket. For example, if you’re just below the 40% tax bracket that comes into effect on earnings above £50,270, you can choose to invest more in your pension to avoid the tax increase.

This would also increase the Personal Savings Allowance and extend other basic tax benefits.