The value of pensions and the income they produce can fall as well as rise. You may get back less than you invested.
At Pure Financial Services we can help you understand the new rules regarding pensions which were introduced by the government under the Pensions Act 2008. Whether you are an employer or an employee the new rules will have an impact on you.
As a pensions expert Pure Financial Services can help you to understand your rights as an employee as well as your obligations as an employer with regard to auto-enrolment. Basically, auto-enrolment is a government initiative aimed at helping more people save for later life through a pension scheme at work.
Auto-enrolment makes it compulsory for employers to automatically enrol any eligible staff into a pension scheme with both the employer and employee being required to make contributions. Auto- enrolment is currently being phased in across the UK starting with larger companies.
The qualifying criteria for staff:
- you must earn more than £192 per week or £10,000 per year
- you must be between 22 and the state pension age
- you must work in the UK
If you do not wish to join you can opt out of auto-enrolment and provided you opt out within a month of being enrolled you will have any money which you have paid in refunded in full. Once you have opted out you can rejoin at a later date and your employer is obliged to automatically enrol you back into the scheme three years after leaving.
Some members of workplace pension schemes may not be affected by auto-enrolment provided that any existing scheme meets the minimum standards of the new scheme.
Employees working for more than one employer could be enrolled in each employer's scheme and anyone who already has existing pensions can transfer them into one scheme. Indeed, since 2006 there have been no restrictions on how many pension schemes someone can belong to.
As a self employed worker you will not be required by law to enrol into a workplace pension. However, it is always advisable to save for your retirement as the current state pension is not expected to provide sufficient income in the future for retirees. It is also worth noting that although life expectancy is increasing, the age at which you can pick up your state pension is also increasing, so future retirees may be faced with a shortfall in retirement provision.
Workers on zero hours contracts as well as workers receiving maternity or paternity pay will also be auto-enrolled provided they meet the conditions.
Once enrolled in a workplace pension you will receive tax relief from the government on your contributions and your employer will have to contribute towards your pension. This makes a workplace pension an attractive option when saving towards retirement as not only do you gain tax relief on any contributions you make you also get money from your employer paid into your pension pot. The age at which you can receive your pension will vary according to the pension plan provided by your company.
You will pay a minimum of 0.8%. of your qualifying earnings rising to 4% by 2018 whilst your employer will have to pay 1% of qualifying earnings rising to 3% by 2018. The government will pay 0.2% of qualifying earnings rising to 1% by 2018.
Employers have a number of options when setting up a workplace pension;
- to use the existing workplace scheme
- to amend the existing scheme so that it meets the qualifying criteria
- to set up a new pension scheme meeting all the criteria
- to use NEST (the National Employment Savings Trust) - a new scheme available to any employer
- to use a combination of these options for different areas of their workforce
Whether you are an employee or an employer Pure Financial Services can help you understand the implications of auto-enrolment and how it will affect you. We have the expertise to help you understand all your options and our advisors will be able to guide you through the process using clear and simple explanations to enable you to make the best decisions. You can trust Pure Financial Services to give you excellent professional advice on all aspects of workplace pensions.
The FCA do not regulate auto enrolment.