Workplace pensions are retirement savings schemes arranged by employers for their employees.
You will be automatically enrolled into a pension scheme picked by your employer if you are:
A percentage of your pay is put into your pension fund every payday. Your employer and the government should also contribute to this fund.
You will be able to access the funds when you retire. This may be paid out in installments (as with income when you were employed), although you may also be able to access some of it as a lump sum upon retirement. You may be able to access all of it upon retirement if the fund is small; 25% of this sum will be exempt from income tax.
Pensions are useful sources of future income for employees during retirement. However, you will be allowed to opt out of a workplace pension scheme if preferred.
All employers are required to provide workplace pension schemes for employees using automatic enrolment. Having started in October 2012 by the biggest employers, auto-enrolment is being adopted and enforced over the next few years.
Know your staging date. This is determined by the number of employees in your largest PAYE scheme. You can find out your staging date at the Pensions Regulator website.
Prepare for your staging date. Tasks to tick off your list include:
Put pension plans into motion. At the staging date, you must automatically enrol all eligible jobholders onto pension schemes, register with the Pensions Regulator, and begin paying in into workers’ pension funds every payday.
Note: Pensions aren’t all about cash outflows for a business. You may identify pension lending as a viable source of business funding, meaning that you can contribute to your employees’ future retirement income whilst tapping into current funds for business growth.