The Money Saving Expert said employers discouraging workers from pension schemes is wrong as it means missing out on employer contributions worth thousands
Martin Lewis spoke out after a caller to his BBC podcast asked about gold investment instead of a pension(Image: ITV)
Martin Lewis has issued crucial guidance to savers after fielding a query about whether investing in gold might prove more lucrative than contributing to a workplace pension scheme. The question came during his BBC Podcast, with a listener revealing their employer had suggested purchasing gold coins instead of participating in the company pension.
The timing of the enquiry coincides with gold prices surging dramatically, with the precious metal reaching approximately 4,435 US dollars (£3,300) per ounce on Monday morning – a rise of around 2% driven by global economic uncertainty following the US-Venezuela invasion and concerns over oil supplies.
However, Mr Lewis expressed serious reservations about the employer’s advice, stating: “Well I think first of all your boss is really naughty. So, let’s remember, assuming the company pension scheme is a classic auto-enrolment pension scheme, you are legally entitled to as an employee, which means if you contribute, then your employer has to contribute as well.”
He emphasised the financial advantages of workplace pensions, explaining: “The minimum contribution is if you put in 5 per cent of your earnings, your employer has to put 3 per cent on top, and that is virtually unbeatable. Now, an employer should absolutely not, by law, be discouraging you from putting money in the company pension scheme.
“I don’t know if it’s a big company or a small company. If it’s a small company and the person owned the company, for them to be saying something like that to you is absolutely outrageous because it smacks to me like they are trying to basically save themselves a cost.”
The financial expert pointed out that workplace pension schemes offer substantial advantages, as employers also make contributions. Rejecting this arrangement means workers are essentially turning down additional compensation.
He explained: “Let’s be really plain about this, if you put money in your company pension scheme, yes while I accept you lose disposable income because you’re getting less in your pay packet because you’re contributing, in total terms you’re getting bigger remuneration so not using the auto-enrollment scheme is effectively you foregoing extra pay. If your boss is encouraging you to forgo extra pay that doesn’t seem right to me.e just feels naughty to me.
“Now if we move off that that bit, and I always say as a standard thing to do most people should be maxing out the money they put in their company pension scheme to make sure their employer is giving them the highest matched contributions they should get because both you’re getting the tax relief from investing in the pension, but you’re also getting the extra employer’s contribution.”
Gold continues to attract investors during periods of uncertainty, with its reputation as a ‘safe haven’ asset drawing renewed attention. Following the recent surge after the US detention of Venezuelan president Nicolás Maduro, Matt Britzman, senior equity analyst at Hargreaves Lansdown, commented: “Gold climbed over two per cent to breach $4,420 an ounce, as traders seek shelter from geopolitical tremors sparked by Washington’s dramatic move in Venezuela.”
He added: “The metal’s rally builds on last year’s stellar run, with its attractions as a so-called safe haven colliding with uncertainty over US rate signals ahead of Friday’s payrolls. For now, gold is wearing the crown as the market’s preferred insurance policy against both political risk and policy surprises.”
Mr Lewis offered his perspective on gold investment: “As for investing in gold, look I can’t talk about individual investments. Gold is seen as a relatively safe asset. It’s an interesting one as if you buy a specific type of UK bullion they any gains you make on it has a capital gains tax exemption so it can be quite useful/.”
He continued: “But you know, frankly depending on which company pension scheme you’ve got you wouldn’t get that capital gains tax investment. If you want to invest in gold you could invest in a gold exchange traded fund – a fund that basically buys gold and moves along with the gold price for you and you could be doing that not just with your own money but with the money your employer is putting in too.
“So I can’t give you the specifics of whether gold is good or bad, that’s a regulated area. I’m not a regulated investment advisor. The truth is no-one knows what’s going to happen to gold over the next few years. It may well be a good investment but I would always think in encouraging you not to put money in your company pension scheme just feels naughty to me.”
The full podcast is available to listen to here.