Pensions Auto-Enrolment – the basics for freelancers

The short version of this article: Employers may try to postpone the ‘auto-enrolment’ of people into their pension scheme and they may try to do it for people who are only on short-term contracts.

But it is almost always in the interests of a worker who could qualify for enrolment in such a scheme to get enrolled. The good news is, that you can often insist on it! So always do it if you can!!

The slightly longer version: As implied in a few previous posts, workplace pension schemes are almost unequivocally a good thing from the worker’s point of view.

Employers deduct something 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.

So you could almost put this into the free money category when thinking about your budgets.

Similarly, the employer is also obliged to pay into the same pot, and they also do so without paying any taxes on it.

The aim of auto-enrolment is to get around 8% of your salary (above a threshold) paid into a pension pot (employer contributes at least 3%, and you contribute the difference).

Auto-enrolment applies to people who are between 22 years old and state pension age* and are ‘workers’ under the definition of the 2008 Pension Act. The intention is to include people who are employed in auto-enrolment while excluding the genuinely self-employed (so that old minefield again!)

So what do freelancers need to know most about all of this? Like many other rights and benefits of being in work, some freelancers never qualify for them because they aren’t in any job long enough.

In theory, though, this isn’t one of those cases – as long as the workers concerned are vigilant.

On the one hand, an employer can ask for a postponement of up to three months, but they have to write to you and tell you that they’re doing so.

On the other hand, you can write to the employer and insist on being auto-enrolled from Day One, and under most circumstances, Bectu would advise all members who could qualify to do so.

There are still triggers – levels of earnings that result in payments starting – and Bectu and Prospect have argued that these triggers should be lowered. Prospect’s pension specialist Stewart Mott has written a useful overview of all of this here. For members who are logged in, there’s also a useful overview guide to pensions – here.

*This whole question of ‘who qualifies’ is a bit messier than this sentence implies. There are some complications related to people who are under 22, or over state pension age while also being under 75, and these rules are also likely to change soon anyway – parliamentary discussions are happening – so I’ll duck all of that in this post if you don’t mind?

This entry was posted in Pensions and tagged , . Bookmark the permalink.

Leave a Reply

Your email address will not be published.