Jeremy Hunt will soon be announcing some big changes to the way we manage pensions in the UK, have a read of this quick blog for more details.
What's changing?
At present, employers in the UK are required to automatically enrol eligible employees into a workplace pension scheme to make sure they're saving for the future. Employees can opt-out but where they stay in the scheme, this means that whenever an eligible employee moves to a new employer they end up with a new pension pot, so over time you could have lots of separate pots. Under the newly proposed plans employees would have one 'pot for life', which means having multiple pots would be eradicated making managing your pension much simpler for employees. Hunt is due to provide more details on the plans within the Autumn Statement.
What does this mean for employers?
We're waiting on more news of how this will work but it will mean the way employers administer pensions is due to change, keep an eye on our posts to see when the changes come into effect and what you need to do.
Do I have to pay into a pension for my employees?
Under the UK's Pensions Act 2008, employers are currently required to automatically enrol eligible employees into a workplace pension scheme and make contributions towards their retirement savings. At the time of writing this blog, Eligible employees are those who are at least 22 years old, earn more than a minimum earnings threshold (currently £10,000 per year), and work in the UK.
How much has to be paid into a pension?
The minimum contribution levels for employers, which are set by law, have been gradually increasing over time. As of 2022, employers must contribute at least 3% of an employee's qualifying earnings towards their pension, while employees must contribute a minimum of 5%. These contribution levels will increase to 5% for employers and 8% for employees by 2025.
While employers are not required to offer a pension plan beyond the automatic enrolment requirements, many employers do choose to offer additional pension benefits to their employees as part of their overall benefits package in order to attract and retain talent. We're also facing a pensions crisis in the UK, where people just aren't saving enough for their retirement, so the more employers can help by providing enhanced pension contributions the better!
Want to know more about pensions? We caught up with Chris Eastwood from Penfold for this insightful video covering the basics;
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Disclaimer
All information within the post is provided for guidance only and relates to the law in the UK, always seek your own legal advice
The information with this post was correct at the time of publishing, November 2023 but may be subject to change
References
https://www.ft.com/content/0d9269ac-bd22-40fa-8d14-b1b6590edb96 accessed 21/11/2023