What is the new Auto-enrolment Pension?
Auto-enrolment is a new government-backed pension scheme for employees who are not covered by their employer’s pension scheme. You don’t need to take any action; you will be automatically included in the new scheme, which is hoped to be rolled out by the end of 2024.
The new scheme will take a small percentage of your salary, which your employer and the government will top up. The rates will slightly increase over time.
I don’t know what you may think of this, but I am a big fan.
Private pensions are complex, hard to set up, difficult to trust and understand. This will be a much simpler pension arrangement. Parents who are self-employed won’t get access to this new scheme and will have to engage with an advisor to set up their own private pension if they haven’t already done so.
Should Carers join the scheme?
There is very little information available about this area at the moment, but I will do my best to keep parents posted.
For Carers to join the scheme, they will need to be employed, but as we know, you can’t work more than 18.5 hours per week. You can opt-out after 6 months, and there are some other exemptions to being auto-enrolled, such as your work salary being under €20,000.
Parents working while on Carer’s Benefit can choose to stay in the scheme. Parents who stop work to go on Carer’s Benefit can drop out temporarily but will be able to rejoin when they return to work.
Does it affect entitlements?
Saving money in your pension rarely affects your application for entitlements such as Carer’s Allowance, Benefit, and Incapacity Child Tax Credit. If anything, putting money into your pension can often help in the means test, as pension contributions are often considered a deduction.
Now, when you reach retirement age, it can be different. If you build up a very large private pension, then this can affect your access to means-tested payments in retirement. It’s just something to be aware of, but it’s not a good enough reason not to enrol, as it would have to be substantial, and the size of your auto-enrolment pension doesn’t look likely to be large enough to impact most families.
Conclude
In its simplest form, this is like the old Special Saving Incentive Accounts, but more on a long-term retirement savings basis. It is free money from your employer and government into your own private pension, which means the state pension won’t be your only source of income in retirement.
I would encourage everyone who is eligible to join the scheme unless it is unaffordable.
