Should My Employer Provide a Pension?

It is really important that you plan your retirement income extensively so you can cover the cost of care during your later years. Prestige Tax and Trust Services answers the question that many people ask, when they are planning for retirement. “Should my employer provide a pension?”

Workplace pensions

Under the Pensions Act 2008, government agency the Pensions Regulator explains, every UK employer must now enrol certain employees into a workplace pension, as well as contribute to this pension. It is important to note that this policy is currently being phased in, with businesses implementing this ‘auto enrolment’ at different stages, depending on their size. What does this mean for you?

Eligible employees

If you meet certain criteria, your employer must enrol you in a workplace pension scheme. You are eligible if you are aged between 22 and state pension age, work in the UK and earn a minimum of £10,000 per annum. You can still join your employer’s pension scheme if you do not meet this criteria and they must contribute, unless you earn £112 per week, £486 per month or £448 per four weeks.

Employer obligations

Once you are enrolled, your employer must pay the minimum contributions on your behalf into the pension scheme on time. They are also obligated to let you opt out at your request, as well as refund any money you have paid within a month. However, they must also allow you to re-join within a year of leaving and as long as you are still eligible, re-enrol you automatically every three years.

There are also certain things that your employer cannot do. They cannot close one workplace pension scheme, without first enrolling you into another, or encourage/force you to opt out of the scheme of your own volition. Your employer is also not allowed imply that you could lose your job by not opting out or unfairly discriminate against/dismiss you for remaining in a workplace pension scheme.

Once you are enrolled in a workplace pension scheme, your employer is obligated to send you a letter detailing key information. This includes the type of scheme you have been enrolled into, who operates said scheme and when you were enrolled. Your employer must also inform you how much they are contributing on your behalf and how much you need to pay in, as well as how you can opt out.

Delaying enrolment

It is important to note that your employer can delay your enrolment into a workplace pension scheme for up to three months. If they have opted for a ‘defined benefit’ or ‘hybrid’ pension scheme, they can delay your enrolment longer. However, in these cases your employer must inform you of the delay in writing and if you wish to do so, let you join the scheme during the delay period of your own volition.

Salary sacrifice

We should also note that you and your employer can also agree to take advantage of salary sacrifice (also known as the SMART scheme). With this programme, your employer pays a portion of your wages into your pension, which in some instances, allows both you and your employer to reduce your tax and National Insurance bills. Ask your employer if they use salary sacrifice in your workplace.

Prestige Tax and Trust Services

Therefore if you meet the above outlined criteria then yes, your employer should contribute towards your pension via a workplace pension scheme. With this option, you can ensure that you are able to cover care costs later in life. If you want more advice on navigating cost of care issues, contact Prestige Tax and Trust Services now, so you can plan well in advance for retirement.

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