Pension as everybody knows is a regular payment that one receives from the state on the official retirement, widows and disabled people. It is a fixed amount to be paid on regular basis to a person, typically when he is retiring from the service age or to some. The many different types of pensions include defined contribution plans, defined benefit plans, as well as several others as customised by the companies or the government.

A new law has been innovated by the government that every employer must add their employees in a workplace pension scheme which is termed as Workplace Pensions Auto Enrolment. All the workers who will be covered under this law should be:

  1. Aged within 22 years and the state pension age
  2. Working in UK
  3. Earning more than £10,000 per year

It is a way of saving for your superannuation which is arranged by your employer. The workplace pensions are also called, ‘works’, ‘company’, ‘occupational’ or ‘work-based’ pensions.

A certain percentage of the employee’s salary is contributed into the pension scheme automatically every week on the day of payment of pay.

Mostly the employer too adds money into the pension scheme for the employee, and the employee gets tax benefits from the government. Usually what the employee will get and how much he can take depends on the type of scheme your employer offers for the employee. One can usually take 25% of the amount which is free of tax.

If the employee pays the Income Tax, the government will add money to the employee’s workplace pension’s auto enrolment scheme in the form of tax benefits. On the other hand, if the employee doesn’t pay the Income Tax, he will still get tax benefit if the pension scheme if the employer uses the feature relief at source to add tax relief to your pension amount.

The employer may also add money. The new law pertaining to the Workplace Pension Auto Enrolment means that employers will have to pay some amount to entitled workers’ pension schemes.

This law states that a minimum percentage of the employee’s ‘qualifying earnings’ must be added into your workplace pension scheme. Which may be the amount the employee earns before tax and is between £5,824 and £42,385 per year or the employee’s entire pay or salary before the tax This may be chosen by the employer as to how to work on the employees qualifying earnings.

The employer will be issuing a letter to the employee in order to inform him that he has been automatically enrolled in the workplace pension’s auto enrolment scheme. However in case the employee wishes to opt out of the scheme, he can leave the scheme within a month of receiving the information. By opting out later than that might create some hindrances in getting the paid in money back. The employer does not have any right to force the employee to opt out of the workplace pension auto enrolment scheme. Once opted out, the employee can again opt back in by writing to his employer.

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