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Pensions: what you need to know about auto-enrolment
The government wants us save more for retirement which is why it's forcing everyone into workplace pensions; but what does it mean for you?
by Michelle McGagh on Jul 20, 2012 at 11:54
'Auto-enrolment' may not mean much to you now, but come October you won’t be able to escape this huge pensions shake-up.
What does auto-enrolment mean?
If you are aged between 22 and state pension age, do not currently pay into a qualifying workplace pension and earn more than £8,105 then you will be automatically enrolled into a scheme.
Auto-enrolment does not apply to the self-employed.
When will I be auto-enrolled?
It will depend on the size of the company you work for. Large companies with 250 qualifying employees or more have to have auto-enrolment in place by 1 October 2012.
Firms with between 50 and 249 staff must implement the scheme between 1 April 2014 and 1 April 2015, those with 30 to 49 staff between 1 August 2015 and 1 October 2015, and those with fewer than 30 staff must have auto-enrolment in place between 1 January 2016 and 1 April 2017.
By April 2017 the government is expecting around 10 million workers who weren’t saving into a pension to be auto-enrolled.
New firms that started trading between April 2012 and September 2017 will have start dates ranging from 1 May 2017 and 1 February 2018, and companies that launch from October 2017 will have to have auto-enrolment in place immediately.
What if I don’t want to save into the company pension?
If you don’t want to save into the company pension scheme – maybe you already pay into a private pension or you feel that you can’t afford to pay into one – then you can opt out of the scheme. Every three years the government will auto-enrol you back into the scheme, and you will have to continue opting out.
The government hopes that if it puts you into a pension and continues to keep putting you into one then inertia will keep you in the scheme, and you will start saving for your old age.
I want to save. How much can I put in?
If you want to stay in the pension then you’ll reap the financial benefit. At first you will only save 1% of your salary that falls between £5,564 and £42,475.
Your employer will match this 1% contribution, giving you double the contributions. Then the government will add some more on top in the form of tax relief, bumping your total contribution up by a further 25% (if you’re a basic-rate taxpayer).
More about this:
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