Whilst it’s tempting to blow all your money on a yacht and throw caution to the wind (be honest, we’ve all thought about it) it’s incredibly important to plan for the future. When it comes to retirement, maybe you will be sunning yourself on a yacht, but it’s also important to make sure you’re financially covered for the basics that you’ll need later in life. That’s why workplace pensions and Auto Enrolment were introduced.
What is Auto Enrolment?
Auto Enrolment was implemented by the government to make it mandatory for all British employers to create a savings plan for their employees. Qualifying employees are:
Both employers and employees will contribute a certain percentage each month that goes directly into a pension pot that cannot be accessed until retirement age.
There is the option to “Opt Out” if an employee does not wish to contribute towards their pension, but to begin with everyone is automatically enrolled.
Originally introduced under the Pensions Act 2008, Auto Enrolment began taking place within larger organisations in 2012. There were various phased staging dates, with all workers being automatically enrolled in an employer workplace pensions by February 2018.
As of April 2020, employees must contribute a minimum of 5% into their pension pot with employers paying in at least 3%, total contributions must be 8%.
That’s ok, the government thought about that. NEST (National Employment Savings Trust) is a public service scheme that enables all employers to use their pension services, and it’s free (AND REALLY USER FRIENDLY)
Alternatively, if you’d like help choosing a pension scheme that is set up for Auto Enrolment it may be worth speaking to a financial advisor, we are brilliant but unfortunately don’t know everything.
For the 2020-2021 tax year, the earnings threshold for pension Auto Enrolment is more than £6,240 annually, £520 monthly, or, £120 weekly but no more than £10,000 per year.
Really? Just call us. Seriously, just call we don’t bite. Calculations are based on employee’s pensionable earnings. You’ll take the gross amount, deduct tax and National Insurance, and then remove pension contributions from the remaining net figure (It’s that easy) However, there can be some variable tweaks to take into consideration, so give us a call, you know you want to.
This is the date your auto enrolment responsibilities start, so you need to make sure you are ready for this. It is recommended by The Pensions Regulator that you start preparing 6 months in advance.
(slaps his forehead with his left hand) the bad news is you may well be liable to penalties from The Pensions Regulator for non-compliance, especially as they will have written to you 12 months ahead of your staging date, so that one’s on you I’m afraid.