For many years, your company may have set up and contributed to a workplace pension. Now many employers are forced to offer you a pension, starting with larger firms.
This is designed to address a chronic lack of retirement savings. At the moment, fewer than one in three UK adults are contributing to a pension.
You have the option to say no to auto-enrolment, however, as it is optional.
If you do nothing, you’ll be opted in.
Auto-Enrolment Key Facts
Who Will Be Auto-Enrolled?
You’ll be automatically enrolled into a workplace pension if you:
- Are employed (this does not apply to the self-employed)
- Are aged 22 or over
- Are under the state pension age, which is currently 65 for men and 61 and five months for women, although this is gradually rising to 65 by 2018
- Earn more than £9,440 a year
How Much Must I And My Employer Contribute?
All employers must ensure the following minimum contributions go into your pension once it’s started. You can put in what you like if aren’t eligible for auto-enrolment yet, or if you pay into a non-workplace pension.
The minimum amount both you and your employer must pay into your pot is worked out as a percentage of your pre-tax qualifying income.
What Is Qualifying Income?
This includes your salary, overtime, bonuses and commission, as well as statutory sick, maternity, paternity or adoption pay. Minimum contributions must be paid on all qualifying earnings between £5,668 and £41,450 a year, though these figures are reviewed each year.
So if you earn £30,000 a year, the current minimum employer/employee contribution is 2% of £24,332 (as you discount the first £5,668), which is £487 a year.