PUBLISHED: 05:28 26 January 2015
(c) Ryan McVay
Auto-enrolment – what does it mean to you as an employee? The team at Lovewell Blake chartered accountants in Norwich explain.
One of the many perks of retirement is not having to gear yourself up for a return to work after time off at Christmas.
That little luxury may come sooner for some than for others, but with the state pension age rising due to increasing life expectancy it’s important to know what you can expect from your employer.
Retirement, pension reforms and auto-enrolment are all very hot topics at the moment and the main message coming from government is that we simply aren’t saving enough for our retirement. In fact, the government estimates seven million of us are saving too little to retire when we want to.
In simple terms, a pension is a savings plan that you (and in the case of a workplace pension, your employer) pay into while you are working and earning. At the point of your retirement you then have access to a pot of money to help provide for you when you no longer receive a wage. Tax relief is given on your employee contributions and with the introduction of auto-enrolment, your employer will also make a contribution.
While you are paying into your pension, these payments are held in a choice of investment funds with the potential to achieve higher growth than generally achieved on bank/building society accounts. There are usually a range of investment funds available for you to choose from, depending on your attitude to risk. The greater the risk you are prepared to accept, the more likely the investment is to increase and decrease in value over a short period of time – this is called volatility.
From February 2014 until 2017, employers across the UK have to automatically enrol their employees into a workplace pension that fulfils certain criteria. This process is called auto-enrolment. Both employers and employees will be expected to contribute to the pension and the funds will be available on retirement to supplement your state pension.
By 2017 you should be automatically enrolled in a workplace pension if you:
• Earn more than £10,000 per annum (2014/2015)
• Are over 22 years of age and under state pension age
• Work or usually work in the UK
If they haven’t already done so, your employer should contact you with details of the pension scheme they have chosen for your workplace pension. When your employer contacts you will depend on the size of the company you are employed by, as different start dates apply depending on the number of employees. If you don’t wish to be included in the scheme you are able to opt-out at this point.
Disclaimer: Please note that this article is provided for your information only. Whilst every effort has been made to ensure its accuracy, information herein may not be comprehensive and you should not act upon it without seeking professional advice.