Transcript: Your Workplace Pension Explained, In Under Two And A Half Minutes
Your workplace pension explained, in under two minutes. The UK government found that too few workers were putting money into a pension.
New laws requiring that all U.K. employers "automatically enrol" their qualifying employees into a workplace pension scheme.
What is a "qualifying employee"?
A qualifying employee is:
- Any employee of any nationality who ordinarily works in the UK,
- Who is 22 and over but under the state pension age,
- and who earns more than £10,000 a year.
Employees falling outside of this may also elect to join the workplace pension voluntarily.
Can employees opt out?
Employers must not encourage or force employees to opt out. However, employees may choose to opt out on their own.
What's in it for the employee?
Initially, employees must contribute 1% of their pre tax pay to the pension. Their employer will then top that up by 1.%. Total pension contribution: 2.0% of the employee's gross salary.
So, initially for every pound of net pay that an employee puts into their pension, another 1 pound 50 will go in on top, for free, from their employer and from the government (in the form of a tax credit).
In early 2018, the employer's contribution will increase to 2.0%, the employee's to 3.0 (which includes the government's tax top up of 0.6%). Total pension contribution: 5.0% of the employee's gross salary.
In early 2019, the employer's contribution will be 3.0%, the employee's 5.0% (which includes the government's tax top up 1.0%). Total pension contribution: 8.0% of the employee's gross salary.
What does it cost the employee?
The government has passed laws to ensure that workplace pension fees are fair. Employees will typically pays a small percentage fee, based on the amount of money in their pension.
What's next for you?
Your employer must set up a workplace pension and assess if you qualify. Whether you qualify or not, your employer is required to keep you informed and tell you about the next steps for you.
What if you have questions?
Please visit https://www.autoenrolment.co.uk/employee-information
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