Corporate Pension Schemes
Auto-enrolment has changed the landscape of corporate pensions. This government initiative now requires every employer to put their qualifying staff into a workplace pension scheme and to make contributions towards their workplace pension.
A qualifying employee is:
Any employee of any nationality who normally works in the UK,
Who is 22 years of age or over but under the state pension age,
and who earns more than £10,000.00 per year.
Employees falling outside of these criteria may also elect to join the workplace pension voluntarily.
Can employees opt out?
Employers are not allowed to encourage or force employees to opt out. However, employees may choose to opt out of their own volition.
What’s in it for the employee?
To start with, employees must contribute 1% of their pre-tax pay to the pension. Their employer will then top that up by 1.%. Total pension contribution: 2.0% of the employee’s gross salary.
So, initially, for every pound of net pay that an employee puts into their pension, another 1 pound 50 will go in on top, for free, from their employer and from the government (in the form of a tax credit).
In April 2019, the employer’s contribution will be 3.0%, the employee’s 5.0% (which includes the government’s tax top up 1.0%). Total pension contribution: 8.0% of the employee’s gross salary.
What does it cost the employee?
The government has passed laws to make sure that workplace pension fees are fair. Employees will typically pay a small percentage fee, based on the amount of money in their pension.
What’s next for you?
Your employer must set up a workplace pension and assess if you qualify to be included. Whether you qualify or not, your employer is required by law to keep you informed and tell you about the next steps for you.
Every business is unique
Many companies have existing corporate pension schemes which we will be happy to review.