INSIGHT: The most common workplace pension misconceptions

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T.H. March, chartered financial planner, Steven Clemence, shares the most common workplace pension act misconceptions…

Misconception: Contributions are based on full earnings.

Steven Clemence: Wrong. There are some criteria an existing scheme can meet, but most employers are auto-enrolling using the qualifying earnings basis. The contributions are a percentage of earnings (for this tax year) between £5,824 and £42,385 per annum.

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Misconception: Staff won’t want to join a pension scheme.

SC: This is not true. After being auto-enrolled in a scheme, most workers are staying in.

Misconception: Workplace Pensions only applies to staff earning over £10,000 a year.

SC: Another myth. The auto-enrolment part of the employer’s duties starts with those earning £10,000 per annum (or a pro-rata amount in a pay period) but the employer has to provide information and allow other workers to join if they want to. They have duties to all employees.

Misconception: If I postpone I don’t need to do anything for three months after our staging date.

SC: This is dangerous one. Postponing only postpones the auto-enrolment part of the duties, it doesn’t change your staging date. You have to communicate postponement to your staff and you have to let them join if they ask to in the postponement period. The pension provider may not accept you if you apply after your staging date.

Misconception: The employer can’t communicate with their staff about the pension.

SC: The opposite is in fact true; the employer has to communicate with their staff about pensions. What they can’t do is, however, is give financial advice, encourage staff not to join or to opt out if auto-enrolled, treat staff unfairly if they do join or decide not to opt out, induce a worker to opt out or not to join or use prohibited conduct in their recruitment process.

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