A workplace pension is savings for your retirement which is arranged by your employer. This works by putting a percentage of your pay into the pension each month, and your employer also adds money into this as well as tax relief from the government. By 2018, all employees will be automatically enrolled into a workplace pension scheme under The Pensions Act 2008.
You are eligible for the scheme if:
- You are aged between 22 and state pension age
- You are a ‘worker’
- You are earning at least £10,000 a year (or no less than £503 a month/£116 per week/£464 per 4 weeks)
- You usually work in the UK
What happens next?
Your employer will be assigned a staging date by The Pensions Regulator which is the date your employer must start carrying out their auto enrolment duties.
You can check your staging date by entering your PAYE reference (found on your payslips) here.
If you meet the criteria for that period, you will be auto enrolled and your employer will make the contribution into your pension for your retirement. If you do not meet the criteria, you will continue to be assessed every pay period and auto enrolled when you do meet the criteria.
Whilst your employer is not obligated to contribute more than the minimum, you are able to add more into your pension should you wish to do so. Please inform your employer if you wish to increase your contribution, and they will inform the pension company. This will also increase the contribution by the government in the form of tax relief.
If you choose to opt-out, both yourself and your employer will not put any contributions into the pension fund. You can opt back in at any point.
Your employer can not unfairly dismiss or discriminate against you for being in a workplace pension scheme, nor can they encourage or force you to opt out.
Your pension will belong to you, even if you leave your employer in the future or do not continue paying into the scheme. It will remain invested and you will receive your pension when you reach the scheme’s pension age.
You may be able to continue with the same pension in your new job, or combine the old and new pension.
How much goes into my pension?
Your pension contributions are worked out based on your qualified earnings which is either the amount you earn before tax between £5,876 and £45,000 a year OR your entire salary or wages before tax.
This is why The Nanny Lounge highly recommends you agree your wage in gross terms. If you are paid in net terms, your employer will be paying both your and their contributions.
3% of your ‘qualifying earnings’, rising over time to 5% by April 2019
Your Employer Pays
2% of your ‘qualifying earnings’, rising over time to 3% by April 2019
What is tax relief?
You can see on your payslip that the government takes tax off your payslip. Tax relief means that some of your money which would have gone to the government as tax now goes towards your pension instead. It is known as Tax Relief at Source and will automatically happen.
Should I Opt-In?
We recommend you opt-in to the pension scheme because quite simply – there’s nothing to lose! Your pay will slightly be decreased but it is going towards your future, along with the top ups from your employer and government. If you are still paying off student loans you may even see a decrease in your payments as your salary is slightly reduced.
More info available on the gov website.