Auto-enrolment in a workplace pension is now a reality. Between 2014 and 2018 companies with eligible employees will have to enrol employees into a workplace pension. Initial enrolment is mandatory; however employees do have the option to “opt out” from the scheme. Whether or not this is the best course of action will depend on each individual’s circumstances. There are, however, key questions that everyone should ask their employer.
What Is Opting Out?
If you opt out within the first month of your employer enrolling you, you’ll get back any money you’ve already paid in. If you opt out later than this, you may not be able to get your payments refunded. These will usually stay in your pension until you retire.
What Is The Process For Opting Out?
When your employer enrols you in a workplace pension, you can choose to opt out. If you want to do this, your employer will provide you with contact details of the pension scheme provider. They will tell you how to opt out.
What Is The Process For Opting Back In?
You can start paying into your employer’s workplace pension again. You need to write to your employer to request to be re-enrolled. Your employer has to accept you back into their workplace pension, but only once in every twelve month period.
When Does Automatic Re-Enrolment Start?
Under current rules, you will be automatically re-enrolled every 3 years. This could be a good opportunity to get some unbiased advice on your financial situation and review your financial plan for retirement.
Will You Be Part Of NEST?
NEST is the National Employment Savings Trust. In essence it is a tool to facilitate the provision of workplace pensions. Employers can choose to use it to manage all aspects of their pension scheme. When they do so, savers can access all relevant details from an online account. Employers can also choose to use an approved scheme from a different pension scheme provider.
Where Is My Money Invested?
The pension scheme provider will offer a choice of funds and it is important to ensure that you pick the best option for you. Different investments carry different degrees of risk. It is therefore crucial to pick the one which strikes the right balance of risk and reward for your personal situation.
What Are The Charges?
The more money goes towards charges, the less goes towards investing for your future. That being so; funds with higher charges should have a clear justification for them. Whichever provider your employer uses there may still be different charges for different funds.
Do You Use Salary Exchange?
Salary Exchange means an employee agrees to give up part of their salary equivalent to the contributions made to a workplace pension. In return, the employer agrees to increase the employer pension contributions to the pension scheme by the same amount. This means both the employee and employer will pay less National Insurance since this will be paid on the reduced salary rather than the full salary. This arrangement requires the agreement of both parties. It cannot be forced on employees.
Do You Use Postponement?
Postponement allows employers to defer auto-enrolment into a workplace pension for up to three months For example: The employer may have temporary or short-term staff that will cease employment within the postponement period. The employer must write to any member of staff whom they postpone to tell them.ment