Am I eligible for a workplace pension?

If you work in the UK, are aged between twenty-two and pension age, and earn more than £10,000 a year then you are eligible for a workplace pension.

If I choose to remain opted-in, how much will I pay in by default?

To begin with, you and your employer contribute a combined amount of 1.8% of your qualifying earnings with your employer contributing at least 1% of that (meaning you’d contribute 0.8%) and the government chipping in 0.2% in tax relief for a grand total of 2%.

What are my qualifying earnings?

Qualifying earnings refers to earnings of between £5,824 and £42,385, bearing in mind that only those who earn over £10,000 are eligible. So, assuming you earn more than £10,000 a year, the percentage you and your employer make in contributions is based on your salary, minus £5,824. E.g. If you earn £12,000 a year, your personal contributions during the first phase of the scheme will be 0.8% of £6,176 (£12,000 minus £5,824) which equals £49.41.

From 1 October 2017:

Contributions will increase to a 5% total. You contribute 2.4%, which the government tops up to 3% via tax relief, and your employer contributes 2% (minimum).

From 1 October 2018:

The combined contribution must be 8% wherein your employer contributes 3%, you contribute 4%, and the government contributes 1% via tax relief. This is where it will stay for the foreseeable future.

Can I opt-out?

Yes, once you’ve been enrolled you can then opt-out at any time but your employer must not coerce you into doing so. Also, everybody who chooses to opt-out gets automatically re-enrolled every three years and must re-opt-out (if that makes sense!?) in order to stay unenrolled – it’s a bit of a hassle.

Anything else?

Yep, you can also take a ‘holiday’ from paying into your pension pot, meaning you remain an active member of the scheme but you and your employer cease making contributions. This ‘holiday’ period can go on indefinitely or, if at any point you decide you do want to save a bit, you can begin making contributions again any time you like. This method gives you more control of how and when you save and also means you’ll avoid being automatically re-enrolled in the scheme every three years (because you never officially opted-out).

With Paycircle you can start and end your ‘holiday’ with one click, making it easy to stay in control of your savings.

I’m a business owner; how much is a workplace pension going to cost me?

Click here to access our free workplace pension calculator tool to assess your team now and find out how all this relates to your business. Our tool tells you who’s eligible for the workplace pension scheme, how much they’ll contribute and (perhaps more importantly!) how much it’ll cost the business. And it only takes ten minutes!

Tom Hart

Posted on Monday 25 Jan, 2016, 4 years ago

January 16, 2018

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