Can I join my workplace pension scheme if I’m on a low salary?

Under current rules, anyone aged 22 or over earning a minimum of £10,000 from a single job is eligible for auto-enrolment. You can choose to opt out if you want to, but it’s not usually recommended unless there are exceptional circumstances, for example, you need to pay back expensive debts first or because you have already started taking your pension and triggered the Money Purchase Annual Allowance which limits your annual pension contributions.

If you’ve been auto-enrolled into your employer’s workplace pension scheme, under current minimum contribution limits, you’ll be paying in 5% of your salary before tax (of which 1% is tax relief), whilst your employer will pay in 3%, bringing the total contribution to 8%. Your payslip should show any pension contributions that are deducted each month and if you’re not sure whether you’ve been auto-enrolled, check with your employer.

It’s important to note that these auto-enrollment pension contributions only have to be paid on ‘qualifying earnings’ of between £6,240 and £50,270 in the 2021/22 tax year. So for those earning low salaries, or indeed very high salaries, the effective contribution may be significantly lower than the headline percentage figures of 3% from the employer and 5% from your own contributions. If in doubt, speak to your employer to understand how your particular workplace pension scheme works.

Some employers will pay in more than the minimum contribution, and you can pay in extra if you want to. You are also able to make additional one off voluntary contributions into a workplace pension at any time and still receive any tax relief eligible to you.

Author: wpadmin

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