From this week 10,700 employers will be auto-enrolling their staff into a workplace pension scheme.
A further 10,700 employers will be auto-enrolling their staff into a workplace pension scheme this week. This is the largest ‘staging date’ of the workplace pension initiative so far, involving the highest number of employers at once.
What is auto-enrolment?
The Government’s workplace pensions scheme is a system in which employees are automatically drafted into pension schemes by their employers.
A percentage of your salary (0.8%) will be automatically taken from your pay, and will be matched by a 1% contribution from your employer and a 0.2% bump from the Government in the form of tax relief. These figures will rise over time: in 2018, you’ll be contributing 4% of your salary, with 3% coming from your employer and 1% from tax relief to make up a total of 8% of your salary in contributions per year.
You can arrange to make larger contributions if you wish to. For more details, read Workplace pensions: what it means for you. Remember, just because you’re automatically enrolled, this scheme is not compulsory and you are free to opt out. Around 10% of employees have opted out so far.
Take control of your pension with a SIPP
What’s the point?
The idea is that a small portion of your pay is automatically placed into your pension pot. By making it an automated system, the Government hopes to get everybody into the habit of saving for retirement and contributing enough to ensure that they will receive a decent pension.
[SPOTLIGHT]People earning less than £10,000 a year will not be automatically enrolled, nor will people under 22.
Now that medium-sized businesses are due to start the auto-enrolment process, thousands more employees will soon be saving more effectively for their retirement with the benefit of contributions from the Government and their employers.
The workplace pensions programme began in 2012, initially with the largest employers. This latest deadline is for medium-sized firms, but the UK’s smallest employers won’t have to launch their schemes until as late as February 2018. Up to the end of May 2014, 15,099 employers had confirmed their auto-enrolment scheme details, according to The Pension Regulator (TPR).
However, a report from TPR showed that almost 8,000 employers might have missed their staging date now. Hargreaves Lansdown says that it has heard anecdotal feedback from some employers that are “struggling to meet their obligations on time”.
What does the new wave of enrolment mean for me?
If you work for a company which had between 62 to 89 employees on 1st April 2012, you should be receiving a letter from your employer detailing their workplace pension scheme.
There are a range of different firms offering workplace pension schemes for employers, so exactly how your money is invested depends on who your employer has gone with. However you will have the opportunity to pick an investment tactic that fits your appetite for risk.
Take control of your pension with a SIPP
Will you be willing to stick with minimum auto-enrolment contributions once they rise to 4% of salary? Would you opt out even at this stage? Let us know your thoughts in the comments below.
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