The value of pensions and the income they produce can fall as well as rise. You may get back less than you invested.
As a pensions expert Total Financial Services Ltd can help you to understand your rights as an employee as well as your obligations as an employer with regard to auto-enrolment.
Auto-enrolment is a government initiative aimed at helping more people save for later life through a pension scheme at work.
Auto-enrolment makes it compulsory for employers to automatically enrol any eligible staff into a pension scheme. Both the employer and employee will be required to make contributions.
The qualifying criteria
- you must earn more than £192 per week or £10,000 per year
- you must be between 22 and the state pension age
- you must work in the UK
If you do not wish to join you can opt out of auto-enrolment and provided you opt out within a month of being enrolled you will have any money which you have paid in refunded in full. Once you have opted out you can rejoin at a later date and your employer is obliged to automatically enrol you back into the scheme three years after leaving. This is because your circumstances may have changed and a workplace pension might be more appropriate for you now. If you do opt out then ask to rejoin your employer is only obliged to action your request every twelve months. If you are eligible you can rejoin at any time. At the same time workers who are not automatically enrolled can ask to join a workplace pension scheme.
If you are already a member of a workplace pension scheme you may not be affected by auto-enrolment providing that your existing scheme meets the minimum standards of the new scheme. If, however, your employer's contributions fall below the minimum contributions for auto-enrolment your employer may need to increase their contributions leaving you with more money in your pension pot on retirement.
If you work for more than one employer you could be enrolled in each employer's scheme and if you already have existing pensions it may be possible to transfer them into one scheme. Indeed, since 2006 there have been no restrictions on how many pension schemes you can belong to.
As a self employed worker you will not be required by law to enrol into a workplace pension however it is advisable to save for your retirement as the current state pension is not expected to provide sufficient income in the future for retirees.
Workers on zero hours contracts as well as workers receiving maternity or paternity pay will also be auto-enrolled provided they meet the conditions.
Once enrolled in a workplace pension, employees pay a minimum of 5% of qualifying earnings, whilst your employer will have to pay 3% of qualifying earnings.
The government will usually subsidise a workplace pension in the form of tax relief if the following applies:
- The employee pays Income Tax
- The employee pays into a personal pension or workplace pension
Employers have a number of options when setting up a workplace pension;
- to use the existing workplace scheme
- to amend the existing scheme so that it meets the qualifying criteria
- to set up a new pension scheme meeting all the criteria
- to use NEST (the National Employment Savings Trust) - a new scheme available to any employer
- to use a combination of these options for different areas of their workforce.
Whether you are an employee or an employer Total Financial Services Ltd can help you understand the implications of auto-enrolment and how it will affect you. We have the expertise to help you understand your options and our advisors will be able to guide you through the process using clear and simple explanations to enable you to make decisions.
The Financial Conduct Authority does not regulate on Auto Enrolment.