Let’s target workplace pensions on those who can save – not tax those who can’t.


There’s a lot of talk about the new legislation we need to make pensions better, but how about using the legislation we’ve got a little bit better!

Why do we moan that the self-employed don’t have access to a workplace pension when Nest will allow them to join on standard terms with just a direct debit? Martin Lewis is still banging on about them needing to take out a shonky stakeholder pension, get with it Daddy oh!

If you are self-employed – check how easy it is!

Another thing…why do we enrol low-earners into net pay pensions when there are relief at source schemes for them – which save them 25% on their contributions

And what are we doing asking Government to legislate for the lower earning trigger to be dropped when we know there are 300,000 low earners who just can’t afford to be in a pension?

If we were excluding the 90% of those on low-earnings that the PPI estimate could afford to save (see chart below), then I could understand the frustration – but we’re not!

If you are earning between £6032 and £10,000, you can “opt-in” to a workplace pension. Opting in is a technical term and it entitles you to an employer contribution if you take up your rights.

Opting-in is a no-brainer if you can afford it. You get the employer contribution and you get a Government incentive to save (which looks like tax relief) – even if you don’t pay tax (so long as you are in a relief at source scheme).

You can even get more, if you’re paying national insurance and your employer chooses to implement salary sacrifice.

All that you have to do to opt-in is write , email or message your employer asking to be “in” and payroll will do the rest. ( if you sent it to your employer electronically, the message must include a statement from you that you personally submitted the request).

Opting in is not the same as joining

If you are earning less than £6,032 you can join a workplace pension but that doesn’t entitle you to an employer’s contribution (though an employer can pay a contribution if they like).

This is not such a great deal but you can still get an incentive that looks like tax-relief though you don’t pay tax ( so long as you’re paying by RAS) and you still get your boss sorting it out for you so you don’t notice it go (as you do a direct debit).

What employers should be doing.

If you’re an employer and the PPI are telling you that 90% of your low-earners would be better off in – then you can do something about it. Because payroll will tell you who they are and you can get in touch with them and explain what they are missing out.

But if you’re an employer who can’t afford to pay your staff a penny more than the minimum wage, remember this. It is not your invitation that matters, it is your employee’s inclination and if Martin Lewis starts telling your staff this stuff, then they are not going to thank you for keeping this from them

An employer must enrol staff who have opted in to a pension scheme they are using for automatic enrolment. The employer must usually do this within a month of receiving the request. Once in the pension scheme, they are treated the same as staff who had to be enrolled which means  paying the employer contribution.

What this means.

Employers who want to encourage opting-in have two good reasons to do so.

  1. For employees who have spare cash, its a good thing to do = an employee benefit
  2. If employees find out they could be getting free money but are missing out because you failed to mention it – it could be the worse for you.

We don’t need more legislation, we need to use the legislation that we’ve got – better.

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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