Patricia Grant Bcom CA
Stephen Grant Bcom CA
Marita Scott BA(Hons) CA
We have prepared a simple introduction to workplace pensions for employees who are about to be enrolled. If you would like copies to send to your employees or would like any assistance with your workplace pension please contact Karen Szotek or any of our other directors who will be happy to help.
In 2016 or 2017 your employer will be introducing a workplace pension scheme in accordance with the rules laid out by the Government and the Pensions Regulator. Under this scheme, if you are eligible, you and your employer will be expected to make contributions to your pension and the Government will also contribute by providing tax relief on your contributions.
Your employer is obliged by law to make an assessment of each employee on the workforce and determine whether or not they are to be enrolled in the pension scheme. If they are, then the employer must enrol them from the appropriate date. If you are enrolled automatically you can opt out of the scheme within one month or you can leave the scheme at any time. Only if you opt out within the relevant period will you be able to get back any contributions which have been deducted from your salary, otherwise contributions will remain in the scheme.
The amount of contributions due is determined by law. Until 31 March 2018 employers must contribute a minimum of 1% of relevant earnings and contributions in total must be at least 2%. These figures increase to 2% and 5% respectively from 1 April 2018, and to 3% and 8% respectively from 1 April 2019.
It can be seen that, at the start of the scheme, your employer is likely to contribute 1% of the relevant portion of your salary to your pension and you will need to pay a further 1% (including tax relief from HMRC). By the time the scheme is in full operation (April 2019) your employer will be making contributions of at least 3% and you will have to make up the balance of up to 5% (less tax relief).
The law precludes your employer from giving you advice on any aspect of your pension. You can take independent financial advice from a suitably qualified advisor or visit the Pensions Regulator website where you will find information for individuals joining workplace schemes and links to other useful sources of guidance both government sponsored and independent. It would be advisable to access these resources before your scheme starts so that you have all the information you need to help you make an informed decision about your pension.