Any person working in the UK will be enrolled into pension scheme from October 2014. All Companies in the UK will auto-enroll their employees and they can enjoy the benefits of such scheme. Apart from this employees can choose their own personal pension plan and opt out from this scheme. However the employees can go for their personal pension when they are auto-enrolled.
After the auto-enrolment the employer will continue to make minimum employer contribution into the employee’s pension fund. This fund is based on the employees earnings and the contributions of employee. The amount of contribution is set by legislation and ranges between 2% to minimum of 1% that an employer is bound to pay.
The process of auto-enrolment
In order to be auto-enrolled the employee must fulfill the following criteria.
- The contractor must be a legitimate employee
- Aged between 22 and the state pension age
- Must be working in UK
- The gross annual earnings should exceed £8,105
The employee who meets the above mentioned criteria is auto-enrolled into a pension scheme. It means that if employees shuffle between different service providers they are auto enrolled into each company’s pension schemes until they opt out.
How to opt out pension auto-enrolment
The basic purpose of this legislation is to encourage employees to save something for their retirement. However, many employees are not inspired by the concept and they usually opt out from this scheme.
Every employee enjoys the privilege of opting out but the procedure may vary with each company. The few things you have to follow while opting out are as under.
- Make a phone call
- Fill in the form
- Or write letter
The whole procedure depends on the employers policies and the employee should clarify any ambiguity before opting out. However, the mechanism demands that in order to opt out the employee should be enrolled first. Therefore, every employee should wait for the instructions from their employer to opt out after getting enrolled.
“The pension’s legislation is introduced with a view to curb the undue influence used by employers to force their employees to opt out.” Greg Dickson of Hamilton Bradbury
The employee should be aware of the pressure exerted by employers to opt out in order to save administrative or pension cost. Apart for this if a employee has already engaged with a pension plan he/she may opt out after enrolment.
Pros and Cons of pension auto-enrolment
There are advantages as well as negative aspects related to pension auto enrolment scheme. The basic advantage is to keep considerable amount saved for your retirement and second benefit is that you receive contributions from the employer. In this way, the amount of pension at your retirement serves as monetary assistance.
It is necessary to mention here that the amount of contributions made by employer depend upon the earnings of the employee. The contractors working with various service providers may use more than one pension schemes, but it is not a proper way to save money for one’s retirement.
Staging dates
These are the dates indicates that when companies can auto enroll their employees. It is the date at which employers should enroll all its employees into pension plan. Mostly these companies don’t offer pension advice but you can seek such help from independent financial advisors. The individual emplyees can choose whether to opt out this scheme but first of all they must look for the implication of using a pension scheme.
(Newswire.net — September 23, 2014) London, London —