Pensions for Nannies

What is a workplace pension?

A workplace pension is a fund for your retirement. It is in addition to your State Pension. Once you reach retirement age you can decide what to do with the money, for example withdrawing all or part of it as a lump sum to pay off your mortgage, or buying an annuity and receiving a weekly or monthly payment. Your workplace pension is protected until you are least 55, except in special circumstances.

Who is entitled to one?

You are entitled to a workplace pension, and will be auto-enrolled, as long as:

  • You earn over £10,000 a year with your employer
  • You are aged over 22 but under State Pension age
  • You are working in the UK
  • You are not already enrolled onto another suitable scheme by your employer

If you are not eligible you can opt-in, providing you earn a minimum of £5,845. Your employer is obliged to set up a pension scheme.If you are over 75 you will not benefit from the employer contributions.

Is it compulsory?

No. You can opt-out of the workplace pension scheme, for example if you have a private pension. If you opt out then you will not be entitled to the employer or government contributions. You will still be automatically re-enrolled every 3 years and have to opt-out again.

Opting out must be your decision. Your employer cannot pressure you into opting out. This is illegal.

When does it start?

Some employers have already set up their pension scheme, others are waiting for their 'Staging Date' (the date they must start the scheme). Your employer's staging date depends on when they became an employer, not when you started working for them. The scheme will be phased in over the next 2 years and by 2018 every employer will have to set up a pension scheme as soon as they start employing someone. You can find out when your employer is due to start by entering their PAYE number here.

Can I choose my pension provider?

Your employer will choose the pension provider. This will be probably depend on which companies their payroll provider is working with. If you change employers and your new employer has chosen a different provider you will still receive your pension from the original pot when you retire. If your new employer uses the same provider as a previous employer then you will continue to pay into the same pot.

How much does it cost?

You, your employer and the government all contribute to your pension pot. The exact amount is calculated as a percentage of your salary.

  • Until September 2017 you contribute 0.8%, your employer contributes 1% and the government contributes 0.2%
  • Between October 2017 and September 2018 you will contribute 2.4%, your employer will contribute 2% and the government will contributes 0.6%
  • From October 2018 you will contribute 4%, your employer will contribute 3% and the government will contribute 1%