Tens of thousands of workers are missing out on free cash from their employer, experts warn.
Many ignore what's effectively a pay rise by failing to start a workplace pension scheme where their company makes an automatic contribution even if they don't pay into their pot (see the Pensions Guide guide).
The average employer pension handout under such schemes is 5% of salary.
This amounts to a tax-free 5% pay rise, though the true value is more because if it's paid via your salary, income tax and national insurance would be deducted.
Financial advice firm Hargreaves Lansdown (HL) says based on average earnings of £23,600, a 5% contribution would amount to £1,180 a year or £58,750 over 30 years (assuming 6% growth after charges and 2.5% inflation). This would currently buy an income of just under £4,000, it adds (see the Annuity Guide).
Figures from HL show 10% of staff offered a pension where their employer contributes even if they do not, fail to join it.
Roughly a third of the schemes it administers operate under this system. Other plans require you to pay in some of your salary before your company adds any money.
Assuming those figures are representative of the wider population, HL says approximately 750,000 people are offered a non-contributory scheme, of which 75,000 fail to take the free cash.
Laith Khalaf, from HL, says: "Not joining one of these schemes is like giving away free money, it's as simple as that.
"You should take any help you can get in building up a nest egg for retirement, whether that comes from an employer pension contribution or from the government via the tax relief it adds to your contributions."
Virtually everyone who saves their cash in a pension gets full tax relief on the amount deposited.
A basic rate taxpayer who saves £80 a month from their take-home pay will see £100 go into their pension, as an additional 20% tax relief is added to your contribution.
A higher rate taxpayer who saves £80 will also get £100 paid into their pot, but at the end of the tax year they can claim a further 20%, in this case £20.
If your employer operates a salary sacrifice scheme you could be even better off because contributions are taken from your pre-tax pay, meaning not only do you get the tax relief but you do not pay national insurance on your contributions.
Salary sacrifice is not beneficial for everyone, however (see the Salary sacrifice MSE News story).
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