Pension Awareness Week 2022 runs from 31st October – 4th November. The campaign is designed to encourage everyone to engage with their pension and to understand the benefits of financial wellbeing more widely.
Gina Acosta discusses some options on how to help savers get on top of pension saving and their financial wellbeing.
Filling in the gap of pension shortfall
The further away from retirement you are, the more time you have to boost your pension savings and the more time your savings have to grow.
For the tax year 2022-23, the full new State Pension is £185.15 per week, but depending on how many years’ National Insurance Contributions you have, you may get less.
A qualifying year’s contributions for state pension can be made up through combining earnings, NI credits, self-employment and voluntary contributions. An individual will need 52 times the lower earnings limit (LEL) of NIC-able earnings for a qualifying year, which is 52 X £123 (for tax year 2022-23) = £6,396. Documents such as a P60 or payslips can be used as evidence that the earnings have reached the required level and a qualifying year for state pension will have achieved.
If you have gaps in your National Insurance record, you may be able to pay Voluntary National Insurance to increase your State Pension entitlement. Additionally, the following options can also be considered;
- Join your employer’s workplace pension scheme. If you are employed, this is the best way to help fill your retirement gap. By law, all employers must now offer eligible employees a workplace pension and make contributions to it.
- Boost your pension contributions into the scheme. If you are already a member of the workplace pension scheme, boosting your contributions to it might be the best option. Many employers match the contributions their employees pay, usually up to a certain amount.
- Set up your own personal pension plan. For those self-employed or who don’t qualify to join a workplace pension scheme, you can set up your own personal pension plan. The options include ordinary personal pensions, stakeholder plans and self- invested personal pension. NEST (National Employment Savings Trust) can also be used which is a scheme created and backed by the government.
Salary Sacrifice – This can boost your pension savings
Salary Sacrifice arrangements involve an employee giving up a part of their salary or earnings in return for non-cash benefit. As salary sacrifice reduces gross pay, it lowers the amount of tax & NI employees pay, increasing their take home pay. As it reduces gross pay, it also reduces the employer’s NI amount that they must pay, thus making it an attractive option for both employee and employer.
As an employee is giving up part of their salary, this amounts to a variation of their contract and must be recorded in writing with the employees’ approval.
Pensions are a popular benefit to offer via salary sacrifice. By law, employers are required to provide a pension and it’s often a benefit many employees are enrolled in. Therefore, the benefit would reach a large proportion of employees and generate a larger savings for employers. It may also make being part of a pension scheme and increasing contributions a little more affordable.
Do you have any lost pensions?
It’s important to track down all the various pension schemes you’ve paid into, to ensure that you receive everything you’re entitled to in retirement.
Pensions Expert reports that job changes and house moves can be two significant factors contributing to the lost pensions problem. On average, people switch jobs 11 times and move jobs eight times and forget to notify their pension providers.
As stated by the Department for Work and Pensions (DWP), this could result in as many as 50 million lost pensions by 2050.
Throughout your employment, it can be tricky to keep on top of all the pension schemes you’ve paid into. Fortunately, The Pension Tracing Service can help trace a pension you’ve lost track of, provided you know the names of your employers or pension schemes.
- Pension Tracing Service can be contacted on 0800 731 0193.
- Tracing request forms can be submitted to Pension service via the GOV.UK website.
- More information on the Pension Tracing Service, can be found on the GOV.UK website
What we do
ECOVIS’ payroll solution is fully compliant with Workplace Pension Auto enrolment requirements. Our Payroll services include:
- Initial assessment of employees at your staging date
- Pension contributions calculations
- Data import and uploads onto your pension providers’ portal
- Pension administrations such as employee communications etc.
For more information, please don’t hesitate to get in touch with our team.