If the thought of pensions causes instant confusion, then you’re not alone. Plenty of people avoid thinking about it or don’t look into their options, as it can be a very confusing matter to deal with. However new laws that have recently come into place in the UK mean that you will be automatically enrolled into a scheme, so now’s the time to start learning about your pension.
What does being Automatically Enrolled mean for you?
It means that every employee must be automatically enrolled into a workplace pension scheme. A percentage of your pay, which can be decided by you, will be automatically put into your pension each payday. This law covers anyone aged 22 through to State Pension Age, currently 65, who earn more than £10,000 a year and work in the UK. Employers must also make a regular contribution to your pension each payday. The amount they input depends on your input.
It’s important to note here that this pension is completely separate to your state pension and has no effect on it at all.
What if I’m a small Business Owner?
Regardless of the size of your business, if you have employees that meet the criteria then it’s your job to make sure they’re enrolled. You must set up a workplace pension scheme and then make the regular contributions to your employee’s pension. There are a number of professional companies, such as The Workplace Pension Consultancy, that will be able to give you advice on setting up a workplace pension for your business and also advise you on the date this needs to be completed by. This depends on the number of employees that you have, with smaller businesses being given longer. For example those with few than 30 employees have an implementation date of June 2016.
When can I, as an Employee, access my Pension?
This is dependent on your specific pension scheme rules, but it’s typically at the age of 55 at the earliest. What you can get also depends on your pension provider, but it is usually around 25% of the amount as a tax free, lump sum. If your pension pot is smaller, you can potentially take it all at once, although the tax-free rule will still only apply to 25%.
What if I don’t want to be Enrolled?
If have a reason for not wanting to be enrolled, such as having your own pension set up already, you can opt out. If you have not yet been enrolled, speak to your employer about the correct procedure. If auto-enrollment has happened at your place of work, you should have already received paperwork informing you of this. However you can still opt out. You can leave within a month of being added to the scheme and this allows you to claim back what you have been paid in. If it has been longer than a month you cannot claim the funds until you retire.
Either way, if you have any questions, make sure to speak to your employer as soon as possible to make sure you can pick the right option for you.
Gary Keeley is the founder of The Workplace Pension Consultancy, which provides advice and consultation for SMEs who are looking to set up auto-enrolment for their staff.