News

 

Under the new scheme, workers in the UK who are over 22 years old and under the state pension age, earning more than £8,105 per year and not already signed up to a company pension scheme will see a portion of their income automatically diverted to save for their retirement. Temporary workers, directors employed under a service contract and agency workers (who are considered to be employed by whoever is paying them) will be among those automatically enrolled.

 

Employees who do not wish to be enrolled may opt out of the scheme by obtaining an opt-out form from their pension provider and submitting the form within a month. If an employee takes longer than one month to submit the form, they will build up a small pension fund, which will be untouched until retirement.

 

Part-time workers may opt in to the scheme and, if they earn more than £5,564, their employer is required to contribute too. 

 

 

Auto-enrolled workers will either join a company’s pension scheme or a group scheme that employers can adopt, such as the National Employment Savings Trust (NEST).

 

The scheme will begin with employees contributing 0.8% of their earnings, employers paying in the equivalent of 1% of a worker’s earnings and the government adding 0.02% through tax relief.  However, from October 2018 contributions will go up to a minimum of 4% from employees, 3% from employers and 1% through tax relief.

 

For example, from October 2018 an employee earning £20,000 annually will see £96.24 going into their pension fund every month. 

The recruitment process, which began yesterday with firms employing 120,000 or more employees, will be phased in over six years. Small businesses with 58 or fewer employees are not expected to take part in the scheme until at least January 2015.

 

 

The new scheme is intended to supplement the current state pension and prevent a further decline in workers’ pension provision. With Britons living on average three times longer than they did 10 years ago, it is hoped that automatic enrolment system will help to resolve the problem of pensioner poverty.

 

If you are a self-employed professional or a single person director, you are exempt from automatic enrolment. However, you are still able to join NEST as an individual member. You are considered a single person director if you hold office as a director of a company and are the only worker in that company.

It is important to note that if you employ staff – even if you are a site engineer with just one full-time secretary – you will eventually be required by law to enrol them in the new scheme.

 

 

If you have any questions or concerns about how the new pension scheme might affect you, please do not hesitate to contact us on 01244 625 500 or by requesting a call back.