This means employees will be saving 5% of their income, up from 3%, while their employer will now be contributing 3%, up from 2%.
 
While this will reduce take home pay by £302 for those earning £25,000, more than half of that (£159) will be offset by a range of tax changes which came into effect last week, according to Now Pensions.

These are: 

• National Insurance – The starting point will rise from £8,424 per year to £8,632 which will put another £25 per year into pay packets

• Income Tax Personal Allowance – This will jump from £11,850 per year to £12,500 which will put another £130 per year into pay packets

• Qualifying Earnings lower limit – The starting point for pension contributions will increase from £6,032 per year to £6,136 which will put another £4 per year into pay packets

Now Pensions says this means almost 53% of the extra pension contributions will be paid for by other tax changes coming into force by the Government.
  
Adrian Boulding, director of policy at Now Pensions, said: “Thanks to these tax changes, when people look at the bottom right hand side of their pay slip in April, they are much less likely to be worried by the increase to their pension contributions.
 
“By cushioning the impact, hopefully people will continue to save and resist the siren call of spending.

“Putting away a little bit more each month will, together with the increased employer contribution, make a big difference to savers’ future retirement prospects.”