Workplace Pension Schemes
Starting from October 2012, if you meet certain criteria, you will be automatically enrolled in a workplace pension scheme. This is to ensure that enough people are saving enough money for their retirement, as many face the risk of a steep fall in their quality of life once they retire (the State Pension for 2012/13 is £107.45/week).
The qualifying criteria for enrolment are as follows:
– Are not already enrolled in a workplace pension scheme
– Are 22 years old or over
– Are under State Pension age
– Earn more than the minimum threshold (£8105 for 2012/13) and
– Work or usually work in the UK.
When your employer has to enrol you in a scheme depends on their size. The largest companies are first, starting immediately. Other employers will follow over the next few years from largest to smallest. The specific date (staging date) can be found here
If you don’t meet the criteria, you can still join if you want, but won’t be automatically. Similarly, you may opt out of the scheme if you meet the criteria, and re-join at a later date. However, your employer is only obliged to let you join once every 12 months. You will automatically be re-enrolled after 3 years.
How much will I pay?
The minimum contributions to be paid will depend on the staging date of the employer.
|Staging Date||Employee Minimum Contribution||Employer Minimum Contribution||Tax Relief||Total Minimum contribution|
|Up to 30 Sept 2017||0.8%||1%||0.2%||2%|
|1 Oct 2017 – 30 Sept 2018||2.4%||2%||0.6%||5%|
|1 Oct 2018 onwards||4%||3%||1%||8%|
But was does this mean on a monthly basis?
Initial monthly contributions, £20,000 salary
|Contributor||Minimum percentages||Max percentages|
|Tax relief (0.2%/1%)||£2.41||£12.03|
This figure will be automatically taken from your paycheck, so you do not need to worry about making the payments.
When can I get the money?
Most people cannot take any money from any pension scheme until the age of 55 however the exact age will depend on the rules of the scheme.
This if only a brief introduction to how the workplace pension reform will apply to you. For more information or questions, ask your accountant or your employer, or have a look at the links below.