By Taylor Revert, Nannytax
Pensions can be confusing, and this is especially true when you don’t work for a large employer. In this blog, we break down workplace pensions for you, and talk about what’s changing in 2019.
What is a Workplace pension?
The idea of a Workplace pension is to take a small percentage of your gross salary (the total amount you’re paid before any taxes, national insurance, or student loans are deducted) and put it into a ‘pension pot’. It’s a method of saving without really trying – and your employer and the Government also contribute a small amount. When you move jobs, your pension pot moves with you. You can claim from your pension from the age your pension scheme allows – for example, NEST allow you to begin claiming from the age of 55.
Does my employer offer a workplace pension?
Back in 2017, the Government rolled out new legislation that ensures that all employers, no matter their size, must offer their employees the opportunity to contribute to a workplace pension as a legal requirement. This scheme, known as automatic enrolment, also applies to those working in the nanny industry. Since the legislation was rolled out, nanny employers must automatically enrol their nannies into a workplace pension scheme if the nanny meets specific criteria. This means that you (the nanny), your employer, and the Government all contribute to a pension pot for you.
Am I eligible for automatic enrolment in a pension scheme?
Currently, you’ll be automatically enrolled if:
- you earn over £10,000 gross per year;
- you are aged 22 or over;
- you’re under State Pension Age (you can check using this calculator);
- you work in the UK; and
- you’re not already enrolled in another qualifying workplace pension scheme.
If you don’t want to enrol in your workplace pension scheme, you now have to ‘opt out’. This can be done via your workplace pension scheme provider.
How much do I pay into my pension?
How much you contribute to your pension varies. You pay a percentage based on your gross salary, but you can increase your contribution as much as you want to as long as it doesn’t cause financial hardship.
The percentage that you, your employer, and the Government pay into your pension pot is currently set at a minimum of 5% - 2.4% from you (the employee), 2% from your employer and 0.6% from the Government.
If you pay the minimum, you can check how much you’ll be paying based on your gross salary using this calculator. However, the minimum contribution changed on 6 April 2019.
What’s changing in 2019?
As of April 2019, the legal minimum pension contribution is increasing to 8% of your gross salary. This includes 4% from you (the employee), 3% from your employer and 1% from the Government. You should be given the chance to opt out by your employer before these increases take effect. It’s also important that your employer is aware of these changes, as their contribution will also increase after 6th April.
Want to know more about nanny pensions?
Check out this article.