Auto Enrolment Pension
Fact sheet provided by Nannytax
We at Nannytax understand that Auto Enrolment is beginning to affect nanny employers, some of our clients are staging in June this year and there are hundreds more each month from January 2016 onwards. In turn, we can appreciate that it is important for you as an agency to be best informed to advise your clients of how this will affect them. We have put together some information for you in this fact sheet that you will hopefully find useful!
What is Auto Enrolment?
Back in 2012 the Pensions Regulator introduced new legislation to ensure that every UK employer implements a workplace pension for their employees to be automatically enrolled into. The employer will therefore be required to contribute towards the pension for their nanny, providing the nanny is eligible. Auto Enrolment is automatic for the nanny, but it is not automatic for the employer so they must ensure that they are fully complying with the Pensions Regulator, or face heavy fines down the line.
When will Auto Enrolment affect nanny employers?
This can vary; Automatic enrolment is being introduced gradually by the Pensions Regulator. The day the new legislation applies to the employer is called their ‘Staging Date’. If the employer started employing before the 1st of April 2012, they will not be affected until June 2015 at the very earliest.
The employer will receive a letter from the Pensions Regulator, if they haven’t already, which will inform them of their Staging Date. If they haven’t received their letter and want to find out their date, they can go onto this website to find out: http://www.thepensionsregulator.gov.uk/employers/staging-date.aspx
Or, use this table as a rough guideline:
When you start/ed to employ When the new legislation applies to you
Between April 2012 and March 2013 1 May 2017
Between April 2013 and March 2014 1 July 2017
Between April 2014 and March 2015 1 August 2017
Between April 2015 and December 2015 1 October 2017
This full table is available on the Nannytax website at: http://www.nannytax.co.uk/workplace-pensions/about-auto-enrolment
Do all nannies have to be automatically enrolled?
The majority of nannies will be eligible for the workplace pension. The qualifying criteria indicates that they need to be aged between 22 and the State Pension Age and earn above £10,000 for the nanny to be enrolled automatically. HOWEVER, a nanny who does not qualify to be automatically enrolled still has the right to ask to join a workplace pension – so even if she only works part-time she can choose to opt in.
There must therefore be a work place pension in place for her to opt in to if she chooses to do so.
What if the nanny doesn’t want a workplace pension, will the employer still have to enrol them?
Yes, for the first month she will automatically be opted in, but if she chooses to opt out she will need to let the Pensions Regulator know that she does not want to take part and her first month’s contributions will be given back. It must be the nanny’s decision to opt out.
Can the employer tell the nanny to opt out?
No, this would be classed as inducement. Encouraging or persuading the nanny to opt-out is ILLEGAL and can carry heavy fines if the employer is caught.
What happens if the employer does not fulfil their obligations to the Pensions Regulator?
The Pensions Regulator has the power to issue steep fines, with a fixed fine of £400 plus a daily fine of £50 for every day that you are non-compliant.
What are the costs for employers?
There will be three entities paying into the pension – the employer, the nanny and the government. Each contributes a different amount which will increase with time:
Dates Employer Nanny Government Total
Present until 30th September 2017 1% 0.8% 0.2% 2%
1st October 2017 to 30 September 2018 2% 2.4% 0.6% 5%
1st October 2018 onwards 3% 4% 1% 8%
These are percentages of the nanny’s GROSS salary. The employer can cut the cost slightly by contributing on the nanny’s Qualifying Earnings instead of the full Gross salary, for a full explanation of contributions on Qualifying Earnings follow this link: http://www.nannytax.co.uk/workplace-pensions/auto-enrolment-costs
What happens if the employer has agreed a NET salary with their nanny?
If the employer has agreed a net salary with their nanny, they are obliged to pay her that amount and cannot make any deductions from this. Effectively, they will be responsible for paying in both the employer contribution and the nanny contribution. That means that you would eventually be paying an extra 7% of your nanny’s salary! Our advice would be to switch the nanny over to a GROSS salary.
If this sounds like too much hassle, we at Nannytax have developed an Auto Enrolment solution…
For a small fee, we provide a simple solution to Auto Enrolment for nanny employers, all they will need to do is the very basic set up with a pension provider (NEST pensions or Standard Life), appoint us as their delegate and we will do the rest:
This table is available at: http://www.nannytax.co.uk/additional-services/auto-enrolment
For more information, advise your clients to contact Nannytax and we will be happy to discuss this further.
020 3137 4402