Whether you are an employer or an employee; you are bound to have heard something about “Auto Enrolment” or “Workplace Pensions”. It may even be that your workplace pension is already up and running. Either way, in this week’s blog, I’m going to give you the basics of what it is and why it’s important.
Due to new pension legislation that was introduced in 2012; all employers are/will be obligated to set up a pension scheme for their staff members and potentially contribute into them too. Those required to comply (‘stage’) first are the larger employers.
Based on the 2015/16 tax year, if an employee earns over £10,000p.a and is aged between 22 and the state retirement age, they will be automatically enrolled in their employer’s pension scheme. Within the scheme, both the staff member and the employer will have to contribute. However, the member can opt out, if they so wish.
If the member wished to stay in the scheme, their contributions could be similar to the following example:
John contributes £40 into his pension. His employer contributes £30, and the Government adds £10 tax relief.
Therefore, a total of £80 will be paid into John’s pension.
Retirement planning can often be put on the backburner. Hopefully with these new changes people will take more control of their longer-term savings and start making plans for themselves and their families for the future.
Up until six months ago, I had only had a small number of enquiries from employers about the workplace pension legislation that has been introduced. Since then, I have had more than the last few years put together. Unfortunately, you can’t just hide your head in the sand and hope it will go away as action does need to be taken. I recently read that approximately 45,000 employers are set to stage in 2015. In 2016, this will increase dramatically to 45,000 employers EACH MONTH. *
As an employer, it is your responsibility to get something in place, or you could potentially face some hefty fines.
Do not delay, get in touch now for a free, no obligation meeting.
*Source: NEST Insight 2015