Millions of workers are being automatically enrolled into a workplace pension by their employer. Once you’re enrolled, not only will you pay in to it but so will your boss and the government.
Example John puts in £40, his employer puts in £30, the government adds £10 tax relief.
A total of £80 will be paid into John’s pension.
This is to make it easier for you to start saving. You can opt out if you want to, but that means losing out on employer and government contributions – and if you stay in you’ll have your own pension that you get when you retire.
Every employer must automatically enrol workers into a workplace pension scheme who:
· are not already in one
· are aged between 22 and State Pension age
· earn more than £10,000 a year
· work in the UK
If you’ve been automatically enrolled in a workplace pension
The law says a minimum percentage of your ‘qualifying earnings’ must be paid into your workplace pension scheme.
‘Qualifying earnings’ are either:
the amount you earn before tax between £5,824 and £42,385 a year
your entire salary or wages before tax
Your employer chooses how to work out your qualifying earnings.
Further reading suggests that this new scheme is going to put more admin pressure on smaller companies where they must enrol employees on to a scheme. Outsourcing that task to an accountant is one way to continue trading without the additional headache it may bring!