Not so long ago, a new scheme known as ‘auto enrolment’ was announced and it promised to radically change the rules regarding workplace pensions in the UK. Some of you, particularly those already in full-time employment may not have noticed any changes as yet, but they are going to happen and, thankfully, they will benefit the worker.
What is a workplace pension?
A workplace pension is a scheme you sign up to whilst employed that helps you save up for retirement. A percentage of your pay is taken and contributed to the fund automatically every payday and in the majority of cases, your employer will also add to it. Once you retire you can – depending on the value of the pension by that point – either withdraw it as a lump sum or receive regular payments to replace your previous wages.
Are they important?
Workplace pensions are very important as currently, State Pensions in the UK stand at just £113.10 per person for each week, and with the age at which these can be accessed and the cost of living seemingly both on the up, a workplace pension can make an excellent supplementary payment to help fund your day to day life. In addition, 25% of it is tax free, leaving you more to spend or save as you see fit.
What is ‘auto enrolment’?
Under the new government initiative known as automatic enrolment, every employer will have to offer access to and pay towards a workplace pension if any of their members of staff meet the following criteria:
- They work within the UK.
- They are aged between 22 and the State Pension age.
- They earn in excess of £10,000.
What do I need to do?
If you are a worker, they great news is that you won’t likely have to do anything. If you are already enrolled in an existing scheme, you shouldn’t even notice a difference and if you aren’t yet involved in a pension, your employer should take care of the responsibility on your behalf, by offering you the chance to sign up to one.
For employers, some businesses will have to begin complying with the new legislation by June 2015 and this has caused some degree of stress, with many worrying about what this means for them. They needn’t panic however, as help is already available with Workplace Pension Schemes to break the process down and guide you through it step-by-step in plenty of time to get organised.
The long and short of the matter is that the new guidelines are not to be feared as they should ultimately benefit everyone. Workers will have peace of mind in knowing they are set up financially for later life, while employers reap the rewards of a happier, more stable workforce.