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Contractor pensions: our advice | PayStream

The government encourages workers to save for retirement, with most people having around 20 years of retirement. Workers automatically enrolled in a pension can opt out within one month and receive a refund. Employers can delay enrollment by up to three months and must re-enroll employees who opt out every three years. Failure to comply results in penalties, starting with a £400 fixed fee and escalating daily fines from £50 to £10,000, depending on the employer's PAYE size.

The minimum contribution rate is being phased in as follows

The employer pays:

1.0% of the qualifying earnings until 6 April 2018, rising to 2.0% until 6 April 2019, then rising to 3.0%.

The employee pays:

0.8% of the qualifying earnings until 6 April 2018, rising to 2.4% until 6 April 2019, then rising to 4.0%.

The Government adds tax relief of:

0.2% of the qualifying earnings until 6 April 2018, rising to 0.6% until 6 April 2019, then rising to 1.0%.

Total contribution:

2.0% of the qualifying earnings until 6 April 2018, rising to 5.0% until 6 April 2019, then rising to 8.0%.

Who qualifies for auto enrolment?

Eligible jobholders

People who must be automatically enrolled in a qualifying scheme, with the option to opt out, are at least 22 years old, under state pension age, work in the UK, and earn over £10,000 annually.

Non-eligible jobholders

People who can opt into a qualifying pension scheme must work in the UK, be aged 16-74, and earn between £5,824 and £10,000 annually. Alternatively, they are aged 16-21 or state pension age to 74, earning over £10,000.

Entitled workers

People aged 16-74, earning less than £5,824 annually, and working in the UK can ask to join a workplace pension, though the employer isn’t required to contribute.

What's required from the employer/agency?

What are the choices?

  • Manage your own pension scheme in-house, which means you'll have to set up and manage the auto-enrolment process.

  • Move worker from agency payroll to an Umbrella, which puts the burden of pension admin onto the Umbrella.

Why PayStream?

We were advised by leading legal firm Eversheds on implementing the new legislation. We chose the enrolment provider, NEST and we meet our obligations set by TPR and DWP.

 

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