Jane earns £20,000 a year and is a member of her employer’s workplace pension scheme.
She contributes 3% of her salary into her pension pot, and her employer contributes 5%.
Jane’s employer has agreed to match her contributions between 3% and 8% of her salary.
Jane is considering increasing her contributions to benefit from her employer agreeing to match her extra contributions.
Currently, Jane is paying 3% of her salary of £20,000 (£600) into her pension each year, while her employer pays 5% (£1,000) a year.
So, the total contribution paid into her pension pot is £1,600 a year (Jane’s contributions are paid from her salary before tax is deducted).
If Jane increases her contributions to 8% of her salary, she will then be paying £1,600 a year into her pension pot. Her employer has agreed to match Jane’s extra 5% contribution – making their total extra contributions 10%. This means they’re each paying an extra £1,000 a year
This increases the total contribution to £3,600 a year.