Martin Lewis: Employed aged under 22, or any age earning under £10,000? How to get a hidden pay rise

Over a year, at this level of saving you'd pay £480 (£360 higher rate), but your pension would have £960 added to it. That's unbeatable.

It is worth pointing out though, that for those who earn less than the personal allowance (currently £12,570/year) – including all those who have not been auto-enrolled due to a low salary – you may not get the same tax benefits, as you don't pay tax.

Whether you get the tax relief or not depends on how your employer has set up its pension contribution arrangement. There are two ways:

1. Relief at source (better for you): Put simply, your employer takes your pension contribution from your salary after any tax is deducted. Your pension provider then automatically claims back the tax off the government at 20% - (whether you’ve paid it or not) and puts it in your pension.  So even though you’re a non-taxpayer you get the 20% tax relief.
2. Or Net pay (worse for you): Here your employer takes your pension contribution before tax is deducted, which is a gain for most people, but as you don’t pay tax anyway, you don’t get a tax benefit.

So, ask your employer which method it uses. Yet if it is net pay - don’t let that put you off staying in the pension scheme, as you’re still getting the employer's contribution – which means £50/mth gets you £80/mth.

Is there anyone who definitely shouldn't be doing this?

If you really can't afford to contribute to your pension, you could consider lowering your contributions if the firm allows it and will still match it. Though if you can't afford to eat or have a roof over your head, of course that's a priority now, so a pension will have to wait. The other times I would say it's best to delay starting are if:

• You've very expensive debts, eg, payday loans or a high 40% overdraft interest. Here it's likely worth clearing these before you start to contribute to your pension. See our Debt Help guide.
  
  
• If you're near retirement and have little savings. There is a chance that having a bigger pension pot could reduce your benefits, but this is a rare scenario. See our 10-minute benefit check-up tool.

Aren't private pensions a waste of cash?

You often hear people, especially those currently near retirement age, swear about how their pension has massively underperformed. Well, that's simply not true. You may be surprised to read that no private pension has ever underperformed.

OK, I am playing a little with words here, but this all stems from a fundamental misunderstanding of what a private pension is. It's not a product. It can't underperform. It's just a special wrapper everyone is given by the Government with the huge advantage that you save from pre-tax salary.

The problem is that historically many people invested their pension savings in 'with-profits' funds, and these were often crap and many substantially underperformed. Yet don't blame the pension wrapper for what was put inside it.

These days, the choice of investment is much better, with lower charges and more transparency. Your firm's pension provider should give guidance on what your options are.

Much of the choice is about 'investment risk'. That sounds scary, but higher risk means you're aiming for fast growth, but accept the fact there's a bigger chance it may shrink. The younger you are, the more room you have to take some risk; as if it goes wrong, there's more time for things to even out.

More frequently asked questions

See the FAQs in my main auto-enrolment blog, including:

- When can I take my pension money?
- Isn't property better than a pension? 
- Isn't a LISA a better way to save for retirement?

And please do let me know your thoughts below, especially if this has spurred you to take action on your pension.