Life begins at 62. Well, possibly … depending on the pension arrangements you’ve made. You see, at 62 you and your employees can start drawing on your pension, and if it’s a good one, that means you’re free to wave goodbye to work for ever. Not many people are aware of automatic enrollment pension schemes and how they work, but having a healthy pension is a vital part of having a fulfilling life.
So, how does this pension scheme work? Well…
By law, every employer needs to create a platform to contribute to a pension with a minimum of 1%. However, after the 6th of April 2018 the minimum contribution has increased to 2% and will continue to increase to 3% in the next tax year. For those of you who are employers it is important to know that to remain a qualifying scheme, all automatic enrollment pension schemes with contribution rates that would be below the minimum amount after the rate increases must apply the higher rates.
So, if you’re an employer: make sure you pay in the right amount, otherwise you’re breaking the law. If you’re an employee – you’re going to have to pay in a minimum of 2.4% this year, rising to 4% next year. With tax relief, by 2020, 8% of your salary should be going into a pension. That’s the theory.
Is that all clear? For most of us it’ll take us until we’re 62 to work out what that all that means. A healthy pension equals a happy employee!
Want to know more about your responsibilities as an employer or have a question about accounting? Give us a call!
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