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Basics Of UK Pension Auto Enrolment

Basics Of UK Pension Auto Enrolment

Basics Of UK Pension Auto Enrolment

Pension automatic enrolment is a rule that was officially launched in October 2012 in the UK. Under the auto enrolment law it is compulsory for every employer of labour, to offer a workplace pension scheme; (be it defined benefit pension or defined contribution pension), automatically enrols workers and also pay money into each worker’s pension pot.

What is a UK Pension Auto Enrolment?

UK pension auto enrolment came about, in order to encourage a saving habit among workers. This was necessitated by the fact that most workers are not saving enough for retirement. This has made living in retirement, a more difficult prospect for many, increasing the strain on the government. This being because such workers rely solely or majorly on the state pension. Pension auto enrolment, eases this strain on the government, as all employers have to automatically enrol their workers into their pension scheme. This thereby, ensuring that more workers are building up a healthy pension pot, to cater for retirement. While, auto enrolment means no action is required from you as a worker, in setting up a pension pot. It is very necessary for you to know all that auto enrolment entails. Taking a look at the basics of UK pension auto enrolment.

Qualification For Auto Enrolment

There are three groups of employees when considering pension auto enrolment. These are:
•Eligible workers
•Non Eligible workers
•Entitled workers
• Eligible workers are employees that must be automatically enrolled and paid minimum contributions by employers. To qualify for auto enrolment, a worker must meet certain criteria. An employer is required to provide pension auto enrolment for any worker who fulfils certain conditions. These conditions are if the worker;
– is between the age of 22 and state pension age
– works in the UK
– is not already in a suitable scheme at work
– earns more than £10,000 per year.

• Non Eligible workers, on the other hand, are employees who meet certain minimum standards but are not required to be automatically enrolled into a pension scheme. This class of workers can ask to join a pension scheme, in which case employers cannot refuse and must also provide minimum contributions. Non-eligible workers are workers who work in the UK and are;

– aged between 16 and 22 or state pension age and 74, and earn around £10,000 per annum
Or
– aged between 16 and 74 and make up £5,824, but less than £10,000 per year.

• Entitled workers are those who are aged between 16 and 74, and do not earn up to £5, 824. Entitled workers like other workers have the right to ask to join, a pension scheme. An employer is not required to pay any contribution for entitled workers, even though he might choose to do so. Often times than not, entitled workers are placed on pension schemes, different from that of eligible and non-eligible workers, usually a personal pension.

Minimum Contributions – Pension Auto Enrolment

The auto enrolment rule came with minimum standards which employers must meet in terms of contributing to pension pots of workers. As it stands, the total minimum contribution is set at 2% of your earnings, with this percentage being shared among employee, employer and the government. 0.8% comes from you, 1.0% from your employer and the government adds 0.2% as tax relief. However, these percentages are set to undergo increases over the next few years. From April 2018 to March 2019, the minimum contribution will be set at 5%. With your employer contributing 2%, the government 0.6% and you adding 2.4%. April 2019 onwards would then see, the minimum contribution set at 8% of your earnings. 3% from your employer, 1% tax relief and 4% from you.
You and your employer can very choose to pay above the minimum contributions, depending on prior arrangements.

Auto Enrolment For Someone With More Than One Job
Anyone with more than one job will have each job treated differently for auto enrolment. That is, it is possible for one to be automatically enrolled in more than one pension scheme. Each employer will verify if you meet the criteria for automatic enrolment, and would enrol you if you do. It is, therefore, an option for you to contribute to more than one pension pot. You may qualify as an eligible worker for one employer, and as a non-eligible worker for the other; in which case, you can ask to join a pensioner scheme, if you so wish. You can also decide to opt out of one of the pension schemes if you do not want to run more than one pension pot.

Opting Out

A worker can decide to opt out after being automatically enrolled into a pension scheme by an employer. This should, however, be done within a month of being enrolled, as it will be treated like you did not join the scheme at all, with all your contribution refunded. Opting out after a month entitles you to only your percentage of the contribution, you can not receive contributions made by your employers or tax relief paid by the government. A worker cannot opt out after the one month period and likewise cannot get a refund. The worker can stop contributing to the pension pot, the contributions that have already been paid will then stay invested in the pension pot.
Employers who try to force a worker to opt out of a pension scheme is committing a punishable offence. It is illegal for your employer to, therefore, threaten you with pay cuts or retrenched benefits if you stay in the scheme.

Pension auto enrolment has been a requirement for large employers since 2012, and by 2018, would apply to all employers. It is necessary for every worker to know which group of employees, he falls into in order to be sure of automatic enrolment. It is also important to keep up to date with news on pension auto enrolment, as it undergoes regular reforms.
The UK pension auto enrolment for most parts has proven to be a good way to save for retirement, with the opt-out rates quite low.

Pension automatic enrolment is a rule that was officially launched in October 2012 in the UK. Under the auto enrolment law it is compulsory for every employer of labour, to offer a workplace pension scheme; (be it defined benefit pension or defined contribution pension), automatically enrols workers and also pay money into each worker’s pension pot. UK pension auto enrolment came about, in order to encourage a saving habit among workers. This was necessitated by the fact that most workers are not saving enough for retirement. This has made living in retirement, a more difficult prospect for many, increasing the strain on the government. This being because such workers rely solely or majorly on the state pension. Pension auto enrolment, eases this strain on the government, as all employers have to automatically enrol their workers into their pension scheme. This thereby, ensuring that more workers are building up a healthy pension pot, to cater for retirement. While, auto enrolment means no action is required from you as a worker, in setting up a pension pot. It is very necessary for you to know all that auto enrolment entails. Taking a look at the basics of UK pension auto enrolment.

Qualification For Auto Enrolment

There are three groups of employees when considering pension auto enrolment. These are:
•Eligible workers
•Non Eligible workers
•Entitled workers

• Eligible workers are employees that must be automatically enrolled and paid minimum contributions by employers. To qualify for auto enrolment, a worker must meet certain criteria. An employer is required to provide pension auto enrolment for any worker who fulfils certain conditions. These conditions are if the worker;
– is between the age of 22 and state pension age
– works in the UK
– is not already in a suitable scheme at work
– earns more than £10,000 per year.

• Non Eligible workers, on the other hand, are employees who meet certain minimum standards but are not required to be automatically enrolled into a pension scheme. This class of workers can ask to join a pension scheme, in which case employers cannot refuse and must also provide minimum contributions. Non-eligible workers are workers who work in the UK and are;

– aged between 16 and 22 or state pension age and 74, and earn around £10,000 per annum
Or
– aged between 16 and 74 and make up £5,824, but less than £10,000 per year.

• Entitled workers are those who are aged between 16 and 74, and do not earn up to £5, 824. Entitled workers like other workers have the right to ask to join, a pension scheme. An employer is not required to pay any contribution for entitled workers, even though he might choose to do so. Often times than not, entitled workers are placed on pension schemes, different from that of eligible and non-eligible workers, usually a personal pension.

Minimum Contributions
The auto enrolment rule came with minimum standards which employers must meet in terms of contributing to pension pots of workers. As it stands, the total minimum contribution is set at 2% of your earnings, with this percentage being shared among employee, employer and the government. 0.8% comes from you, 1.0% from your employer and the government adds 0.2% as tax relief. However, these percentages are set to undergo increases over the next few years. From April 2018 to March 2019, the minimum contribution will be set at 5%. With your employer contributing 2%, the government 0.6% and you adding 2.4%. April 2019 onwards would then see, the minimum contribution set at 8% of your earnings. 3% from your employer, 1% tax relief and 4% from you.
You and your employer can very choose to pay above the minimum contributions, depending on prior arrangements.

Auto Enrolment For Someone With More Than One Job

Anyone with more than one job will have each job treated differently for auto enrolment. That is, it is possible for one to be automatically enrolled in more than one pension scheme. Each employer will verify if you meet the criteria for automatic enrolment, and would enrol you if you do. It is, therefore, an option for you to contribute to more than one pension pot. You may qualify as an eligible worker for one employer, and as a non-eligible worker for the other; in which case, you can ask to join a pensioner scheme, if you so wish. You can also decide to opt out of one of the pension schemes if you do not want to run more than one pension pot.

Opting Out
A worker can decide to opt out after being automatically enrolled into a pension scheme by an employer. This should, however, be done within a month of being enrolled, as it will be treated like you did not join the scheme at all, with all your contribution refunded. Opting out after a month entitles you to only your percentage of the contribution, you can not receive contributions made by your employers or tax relief paid by the government. A worker cannot opt out after the one month period and likewise cannot get a refund. The worker can stop contributing to the pension pot, the contributions that have already been paid will then stay invested in the pension pot.
Employers who try to force a worker to opt out of a pension scheme is committing a punishable offence. It is illegal for your employer to, therefore, threaten you with pay cuts or retrenched benefits if you stay in the scheme.

Pension auto enrolment has been a requirement for large employers since 2012, and by 2018, would apply to all employers. It is necessary for every worker to know which group of employees, he falls into in order to be sure of automatic enrolment. It is also important to keep up to date with news on pension auto enrolment, as it undergoes regular reforms.
The UK pension auto enrolment for most parts has proven to be a good way to save for retirement, with the opt-out rates quite low.

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