Pension contributions are changing, so if you pay into a company pension scheme, your contributions will be increasing at the beginning of April. But if you’re not paying into a company pension scheme, you may wonder what all the fuss is about and why it’s important to consider a company pension. So, we’ve all heard the phrase auto-enrolment, but what does it actually mean and how does it affect you?
Auto enrolment was introduced by the Government as they were finding that not enough people were saving for their futures. This meant that by the time millions of people retired, they wouldn’t have enough to live on. They decided to take action and made it so that all UK employers would have to put their qualifying employees into a workplace pension scheme. This started back in 2012, but this was only for larger businesses. This has now worked its way down so all UK employers now have to enrol qualifying employees into a pension scheme.
What is a qualifying employee?
For an employee to be classed as eligible, they must meet the following criteria:
• Aged between 22 and State Pension age
• Earn over £10,000 a year (£192 a week if you’re paid weekly)
• Work in the UK
Employees that qualify can pay a percentage into the pension scheme, with the employer also making a contribution.
How do I join the scheme?
When you are registered with The Wage Shop, you will receive an e-mail from Smart Pensions, who manage the employee pension scheme for the company. This will provide details on the contribution values, when you will be able to start making payments into the scheme and how to contact Smart Pensions for more information.
How much do I need to pay into the scheme?
At the moment, contribution amounts are set to total 5%. This is made up of a 2% contribution from the employer and 3% contribution from the employee.
From April 2019, contribution amounts are increasing to total 8%. This is made up from the employer contribution increasing to 3% and the employee contribution increasing to 5%. Don’t forget as a Contractor under an Umbrella scheme, you would be responsible for both elements of the pension contribution.
What if I’m not sure about the Pension Scheme?
The Wage Shop can’t advise you on whether to join or opt out of the pension scheme – only you can make that decision. If you are unsure, speak to a pensions adviser about what this decision could mean for you and your future.
I don’t want to join the scheme. Can I opt out?
Yes, you can opt out of the pension scheme. This can be done at any time, but only once you have been enrolled. You are enrolled onto the pension scheme after 3 months of being registered with The Wage Shop. Once you have made the first contribution, you must opt out within one month – this means that your original contribution can be returned to you. If you opt out after one month of your first payment, the value of your contributions cannot be refunded, but no further contributions will be made.
I’ve opted out, but changed my mind.
Once you’ve opted out, you can re-enrol into the pension scheme. Contact Smart Pension on how this can be done. Once you’ve opted back in, contributions will be taken from your next payroll.
There’s lot more information about auto-enrolment with The Wage Shop. If you are not yet an employee of The Wage Shop and want further information, take a look at the Pension Advisory Service website for further information.
As an employee of The Wage Shop, if you have further questions, take a look at the website or Contact Us for more information. Don’t forget you can log directly into your Smart Pension Account directly from our website.