From 1 February, every employer in the UK must have a pension scheme in place for its workers.
“Auto-enrolment” has been extended to every person or business that employs anyone – even if that is just one person.
The rules apply equally to someone who employs a nanny or carer as to the biggest company in the UK.
To be eligible for automatic enrolment, the employee must earn more than £833 a month (or £192 a week) and be between 22 and State Pension age – currently 65 for men and, from March, 64½ for women.
These people must be automatically enrolled in a work pension scheme. That means employer and employee both have to pay in. Currently, minimum contributions are 2 per cent of earnings between £490 and £3,750 a month (between £113 and £866 a week), shared equally at 1 per cent each.
From 6 April those contributions will treble to 3 per cent for the employee and double for the employer, to 2 per cent. From 6 April 2019 they will rise again, to 5 per cent and 3 per cent.
People aged 16 to 74 who aren’t auto-enrolled can opt in to the scheme if they earn more than £490 a month (£113 a week). Both employee and employer have to pay contributions. People aged 16 to 74 who earn less can join, but the employer doesn’t have to pay contributions.
Part-time workers are in the worst position. The earnings requirements apply separately to each job. So someone earning less than £192 a week in each of three different jobs would not be automatically enrolled. However if they earned more than £113 a week in any of those jobs, they could opt in to that firm’s scheme and get contributions paid by their employer.
Since auto-enrolment began, nine million more people have started paying into a pension at work. The Government wants to go further.
First, it would reduce the qualifying age from 22 to 18 to bring another 900,000 people into the scheme. Second, it would make contributions payable on all earnings, not just on those above £113 a week, adding £2.6 billion to the amount being saved. But no change is expected before the mid-2020s.
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