Auto-enrolment pensions: changes are coming
Most workers in the UK are automatically enrolled into a workplace pension scheme by their employer. If this is the case within your business, changes are coming in April which mean employees’ take-home earnings will slightly decrease.
What is auto-enrolment?
When joining a new workplace, the majority of workers are added into a workplace pension scheme without having to ask or apply. From the date that they’re automatically enrolled, most workers have a one month period to decide whether they’d like to not join or to ‘opt out’ of the scheme. This change was brought in back in 2012 to ensure that people had to consciously make the decision to not contribute to a pension scheme instead of ignoring it altogether.
Enrolment is currently automatic for workers who are either over the age of 22 or who are earning a minimum of £10,000 from a single job.
Pension contributions: what’s changing?
At the moment, the total minimum contribution is 5% of earnings, of which at least 2% of this must come from an employer, with the remaining 3% to be contributed by the employee. From April 2019, the total minimum contribution will be jumping to 8%, with at least 3% to come from an employer and the remaining 5% to be added by the employee.
What does this mean for my employees?
Contributions into a pension scheme are based on a pre-tax salary so take-home earnings will be dropping slightly but it actually won’t cost employees as much as it sounds.
Put into practice, employers will be contributing an extra £100 a year per £10,000 salary so it’s essentially a hidden pay rise – just one that employees won’t benefit from until they withdraw their pension.
Based in Hampshire or the South and need some face-to-face advice?
Before making any speedy decisions when it comes to finance, be sure to always seek advice from a trained professional. If you have any questions or would like some expert advice, contact the friendly team at Clear Vision, based in Romsey, near Southampton, Hampshire. Call 01794 330025, email info@cv-fm.com or visit www.cv-fm.com.
