Pensions Auto Enrolment & FAQ's
In October 2012, after decades of growing concerns over Britain’s pensions ‘timebomb’, legislation was introduced to help workers save for retirement. Under the new law, UK-based companies must include their employees in a pension scheme and, unless the employee opts out, make employer contributions based on the individual’s level of pay. That’s assuming the employee meets certain qualifying criteria.
The date at which a company must begin enrolling workers (known as its staging date) depends on the number of employees included on its payroll in April 2012. By December 2013, a total of 3,670 companies had started enrolling their employees – with more than two million employees choosing not to opt out. Experts predict
How does it work?
eQuidity automatically enrols all employees who:
- Are aged between 22 and State Pension Age (SPA)
- Earn over £10,000 a year (subject to change)*
Once an employee has been automatically enrolled into the pension scheme, they can stay enrolled but they also have the opportunity to opt out within a set time period or leave the scheme at a later date.
* Please note that these amounts are subject to change by Government (usually in April each year) so please refer towww.gov.uk for the most up to date amounts.
Here are the answers to the most commonly asked questions…
1. Why do you not have the choice whether or not to opt into the Pensions?
Due to the increasing proportion of the population not being adequately prepared financially for their retirement, the Government is introducing new legislation to address this problem. Starting from 1st October 2012, all UK employers will be required to automatically enroll eligible employees into a qualifying Pensions scheme, based mainly on age and earnings.
2. What if I don’t want a Pension?
Once you have been auto enrolled into the Pensions scheme, you do have the opportunity to opt out within a set time period and have any contributions refunded. You also have the right to leave the Pensions scheme at any time after that but your contributions will not be refunded. However, a Pension is there to provide an income for your retirement so you need to think carefully about how you will cope financially once you are no longer working.
3. What if I already have a Pensions or pensions with other providers?
You can continue to invest in an existing Pensions scheme. We would recommend talking to an IFA about your options. However, due to the new legislation eQuidity is required to automatically enroll all eligible employees into a qualifying Pensions scheme.
4. What happens to the Pension if I leave eQuidity?
The Pensions will be held by the Pensions provider and will be available to you when you reach retirement age. You can continue to contribute to the Pension if you move to another employer. We can provide you with further details directly as required.
5. Will contributing to a Pension mean that I will pay less tax?
Yes, contributing to a Pension does mean that you will benefit from tax relief on any Pensions contributions.
6. I’m approaching State Pensions Age so is it worthwhile for me?
It will depend on your individual financial circumstances. We would recommend talking to an IFA about your options.
7. What will the impact be on the amount that I take home each week/month?
This will depend on the amount you are paid. However, it is likely that there will be a minimal impact on the amount you take home initially as prescribed contribution levels are quite low. The minimum contribution levels are set to increase in 2017 and 2018 in line with government legislation.
8. Will there be any fund management charges associated with the Pensions?
All Pensions schemes have associated charges to administer them and invest funds. You will be fully advised of these costs up front which usually get charged to your Pensions fund rather than being an additional cash cost.