A short guide to our Workplace Pensions support
Increasingly, individuals are starting to understand the importance of have personal provision. The respected Behavioural Economist, Shlomo Benartza once said in regards to saving ‘the pain you’ll feel saving now, will be nothing in comparison to the pain you’ll feel in retirement if you don’t‘. And by taking advantage of the rules of compound growth, the earlier start saving, the better this will be. The purpose of auto enrolment is to ensure all individuals have some sort of personal provision when they retire. Workplace pensions goes a long way towards helping individuals save for their future.
Workplace Pensions was introduced in the UK on a staged basis from October 2012. It is widely recognised that state provision will not be enough for most individuals to retire on.
The Background behind workplace pensions
In 2005 the government’s pension commission called for wider and fairer pension coverage identifying that automatic worker enrolment and employer contributions are key to making schemes work. It is estimated that 7 million people are not saving enough to deliver the pension income they need or want.
When did the legislation start?
Starting from October 2012, all employers must by law offer a workplace pension scheme. You, your employer and the government will pay into your pension if you’re enrolled into a workplace scheme.
Who is required to be enrolled?
Every employer must automatically enroll 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
What are the costs?
There are different tiers available and the tier which is ultimately chosen to be most suitable will have different implications to the overall cost. The minimum requirements by April 2019, for each tier is:
A total minimum contribution of at least 9% of pensionable pay (at least 4% of which must be the employer’s contribution), or
A total minimum contribution of at least 8% of pensionable pay (at least 3% of which must be the employer’s contribution), provided that pensionable pay constitutes at least 85% of earnings (the ratio of pensionable pay to earnings can be calculated as an average at scheme level), or
A total minimum contribution of at least 7% of earnings (at least 3% of which must be the employer’s contribution) provided that all earnings are pensionable.