Pensions
One of the biggest advantages of paying into your pension is tax relief, but when you work for yourself, it can be difficult to see what this means for you in real money terms.
The best way to think about tax relief on pension contributions is like a savings bonus from HMRC.
The government wants to encourage the self employed to put money aside for later life.
Every time you pay into your pension, you’ll get a ‘tax bonus’ on your contributions.
Who is Eligible?
PAYE and Self Employed Sole Traders are usually eligible for Pension Provision
Ltd Co Directors are not eligible to be enrolled in Production Company Pension schemes, however, depending on how your own company is set up, you may be able to enrol in your own pension scheme.
As with any financial queries, seek the advice of a Financial Advisor - BECTU approved provider, Lighthouse Financial Advice, offers a complimentary financial review to members. Login to see all the benefits that come with your membership
What are the Benefits?
In short, it's FREE MONEY paid into a pension pot for your retirement, plus, you can top up your pension, reducing your tax liability each year.
How Does It Work?
In short, Employers deduct from your salary and pay it into a pension savings pot where it is invested and gathers value. If the employer didn’t do this and paid the money directly to you, you’d pay tax on it.
Essentially, around 8% of your salary is paid into the pot, with the Employer contributing at least 3%, and you contributing the rest.
How Do I Sign Up?
All employers must provide a workplace pension scheme. This is called ‘automatic enrolment’.
Your employer must automatically enrol you into a pension scheme and make contributions to your pension if all of the following apply:
you’re classed as a ‘worker’
you’re aged between 22 and State Pension age
you earn at least £10,000 per year
you usually (‘ordinarily’) work in the UK
When Does Auto Enrolment Kick In?
Auto Enrolment starts on the first day of your engagement, however, employers may try to postpone due to short-term contract guidance from The Pensions Regulator (TPR). The employer must write to you to request permission to postpone; the letter should look something like this.
I've Had A Postponement Letter, What Now?
Those same guidelines that allow a 3 month postponement also say that a worker can insist on being auto enrolled onto the company pension scheme from day one.
Write back and say you would like to join the workplace pension scheme - example wording in the Resources section below
My Employer Won't Let Me Enrol Me!
If an employer refuses your request to be put onto the auto-enrolment pension from day one, they are very likely to be in breach of the Pensions Regulator’s (TPR) guidance on automatic enrolment.
Contact us, and we can put you in touch with our Bectu official, who may call or write to offending employers to ensure they implement the letter when staff join and enroll staff when they ask.
If the employers continue to ignore this request, the next step would be for BECTU/Prospect's Pensions Specialist to contact the Pensions Regulator, who has the power to issue warnings and fines and in extreme cases, pursuing a criminal conviction with maximum punishment of 2 years in prison
It is highly recommended that you speak with an Independent Financial Advisor to make the most out of your pension
Resources
A workplace pension is a way of saving for your retirement that’s arranged by your employer where a percentage of your pay is put into the pension scheme automatically every payday, your employer also adds money in and you may also get tax relief from the government.
UK Gov
TPR works to protect the UK’s workplace pensions, making sure employers, trustees, pension specialists and business advisers can fulfil their duties to scheme members.
Being a Bectu member doesn’t just benefit you in your work life – you can also making savings outside of work, whether its on your bills or leisure activities. Find out more here
some links, including finding out about Lighthouse Financial Advice, may require membership login
Postponement Letter Reply
If you receive a postponement letter, copy & paste this example wording into an email or document, fill in the blanks and send to Production;
Dear <Production Contact>
As you are aware, to help people save more for their retirement, all employers are now required by law to provide a workplace pension scheme for certain staff and pay money into it.
This applies to any workers who meet all the following criteria:
• Earn over £192 per week (or £833 per month)
• Are aged 22 or over and
• Are under state pension age
As you have sent me a postponement letter, I believe that I meet all the above criteria and would like to be automatically enrolled into your workplace pension scheme.
I understand that money will be paid into the pension directly from payroll, and that the government may also contribute through tax relief.
I also understand that as I earn over £120 a week (or £520 a month), the minimum amount you will put into the scheme will be 5% of my earnings and that your company will also contribute into the pension fund too.
‘I confirm I personally submitted this notice to join a workplace pension scheme.’
I look forward to hearing from you promptly.
Yours sincerely,
<Name>
<Contact Details>