1. Any member of staff whether part time or full time earning more than £10,000 a year (tax year 2016-2017) can be a member of their company pension scheme. All eligible staff members are automatically enrolled in the scheme and if they do not wish to join, it is their responsibility to opt out. Staff under 21 and those over 65 also have a right to opt into the scheme but will not be automatically enrolled. Anyone automatically enrolled, has the opportunity to opt out but after the first month of participation any payment you have made will stay in your pension pot for retirement.
Those who choose to opt out can opt back in at any time. By law your employer must re-enrol you back into the scheme approximately every three years, as long as you still meet the eligibility criteria.
2. The total auto enrolment minimum contribution is currently set at 2% of your earnings (0.8% from you, 1% from your employer, and 0.2% as tax relief). From April 2018, it will increase as follows:
– April 2018 to March 2019: 5% of your earnings (2.4% from you, 2% from your employer, and 0.6% as tax relief).
– From April 2019 onwards: 8% of your earnings (4% from you, 3% from your employer, and 1% as tax relief).
The pension provider claims tax relief at the basic rate on your contributions and adds it to your fund. If you are a higher or additional-rate taxpayer, you’ll need to claim the additional rebate through your tax return.
Your pension pot builds up using your contributions, any contributions your employer makes, investment returns and tax relief.
After consultation with David*, the employee can increase their contribution from 1% up to 6%. The usual contribution employees decide upon seems to be either 3% or 5%.
3. The amount submitted by the employer is normally 1%. By 2019, the employer contribution will rise to 3%.
4. Futurity have worked with Aviva and Royal London setting up Group Pensions. We assess the market and identify the greatest partner depending on the best charging structure for the client.
5. The whole process can take roughly a month/two to put together once all the information has been collected.
6. The end result is an employer with a carefully selected pension scheme put together to help staff add contributions to their pension pots for their retirement.
*David Hand is our Small Business Group Pension Expert