Employers and employees are being opted-in, by the UK gov, to set-up and pay into a pension, it's called auto-enrolment. Becasue pensions are a snooze-fest we’ve selected the juicy bits – 6 essential facts you should know.
1. EVERY employer in the UK must put ‘certain staff’ into a pension scheme and contribute towards it. This is called 'automatic enrolment'. Do you count as ‘certain staff’? If you earn over £10K and you are aged between 22 and 66, you do.
2. Your employer has to put the equivalent of 1% your earnings into the pension, this rises to 2% from April 2018 and then 3% from April 2019. BTW, they can choose to contribute more.
3. You have to contribute a minimum of 0.8% of your earnings which rises to 2.4% from April 2018 and then 4% from April 2019.
4. This means by 2019, EVERYONE on auto-enrolment will have the equivalent of 7% of their earning’s amount placed into a pension aka a lot of money.
5. The best thing about pensions is the tax-relief. In most cases auto-enrolment will operate on a salary sacrafice which means the money is placed into your pension before income tax and National Insurance (N.I.) has been deducted. This is a huge saving - Relief on income tax alone saves you 20% if you are a Basic-rate tax payer, 40% if you are a Higher-rate tax payer and 45% if you are a Higher-rate tax payer.
6. Your employer will choose a pension provider and a selection of funds. They should give you a say over which fund your money will go into. Check the funds on offer and make a decision on the best one for you – We have a guide for that.
Feeling motivated to learn more or simply need some pointers before your next financial advisor meeting, try MOXI’s Pension Guides.