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TRUST|Pensions® for Nannies & Carers

Automatic enrolment legislation introduced by the UK Government’s Pensions Act 2008, requiring all employers to enrol their qualifying employees in a workplace pension scheme affects those who employ nannies and carers.  This includes those receiving direct payments to pay for their care and support.  See The Pensions Regulator's useful guide for more information.
 
Anyone who has employed their nanny or carer from 1 April 2012 will have to set up and pay into a qualifying pension scheme between June 2015 and February 2018, depending on their staging date. If you have employed a nanny or carer after that date, do double check to find out when your staging date is.
 
STEP 1: Check your staging date

If you have already registered with HMRC as an employer and want to find out by what date you need to comply with the new regulations and when your staging date will be, please go to The Pensions Regulator website and key in your PAYE reference number.  You may have received a letter from The Pensions Regulator explaining when your staging date is and what you need to do next.  Our 10 step guide can help you from this point.

You will have six weeks from your staging date in which to register your employee, provided that they qualify as an ‘eligible jobholder’, with a qualifying scheme and start paying contributions. If you have a payroll provider, they can help set this up for you using TRUST|Pensions® as qualifying workplace scheme.

STEP 2: Establish whether or not your nanny or carer is actually eligible to be enrolled in an auto-enrolment pension scheme
An ‘eligible jobholder’:
  • Is not already in a workplace pension scheme;
  • Is between 22 years old and State Pension age;
  • Earns more than the minimum earnings threshold (currently in 2015/2016: £10,000); and
  • Works or ordinarily works in the UK according to their contract.
Be aware that if your employee does not qualify as an ‘eligible jobholder’ to be automatically enrolled, they still have the right to ask to join a workplace pension.
When do you NOT have to set up a pension scheme for your employee?

If you have employed a nanny or carer through an agency and you pay the agency who in turn pays from the agency’s payroll, then the nanny or carer is being employed by the agency, not you, and it is the agency’s responsibility to enrol them into an auto-enrolment pension scheme.

If you assess your employee and they are a ‘non-eligible jobholder’ or an ‘entitled worker’ you are not obliged to set up a scheme to automatically enrol them. However, if they then ask to be enrolled into a scheme you must then set one up and enrol them.

Obligations under the Pension Act 2008 apply whether the employee is temporary or permanent as long as they qualify as an eligible worker, however, anyone employed for less than three months will not need to be enrolled by their employer automatically as you can postpone a new employee from enrolment for up to three months.

STEP 3: Understand your Employer and Employee obligations

Calculating Contributions

Pension contributions will be based on your employee’s gross salary earnings, including overtime and bonuses within the qualifying earnings band, so it is important to agree a gross salary with your employee before they start work.  A payroll provider can help you with this.

Employer and employee contributions

Contributions are due to gradually increase over the next few years.

Date Employer
Contribution
Employee
Contribution
Total
Up to 30th September 2017 1.0% 1.0% 2.0%
1st October 2017 – 30th September 2018 2.0% 3.0% 5.0%
From 1 October 2018  3.0% 5.0% 8.0% 

 Qualifying Earnings

 If your nanny qualifies as an “eligible jobholder”, as their employer, you will be expected to pay a minimum contribution into a pension scheme based on your nanny’s “Qualifying Earnings”.

Qualifying Earnings are currently defined as the amount between an annual gross salary of £5,824 to £42,385 (for tax year 2015 to 2016).  You can see a full table here.

EXAMPLE 1: This means that if your nanny is earning £15,000 per year, you calculate the contributions on the amount of £9,176 (£15,000 minus £5,824). The employer contributions (as they gradually increase over time) on top of the full salary will be £91.76 (1%), £183.52 (2%) and £275.28(3%) per annum. Similarly the employee’s contributions made from their gross salary will be £91.76(1%), £275.28(3%) and £458.8 (5%) per annum.

EXAMPLE 2: If your nanny is earning over £42,385 you calculate their earnings as follows:

Your nanny earns £50,000, which is above the Qualifying Earnings cap of £42,385. Therefore the employer pays a pension contribution based on the amount of 42,385 – £5,824 = £36,561.  £365.61 (1%), £731.22 (2%) and £1096.83 (3%). Similarly the employee makes their contribution based on their qualifying earnings. In this case, £365.61 (1%), £1096.83 (3%) and £1828.05 (5%) per annum.

STEP 4: Choose a suitable scheme

Parents can choose whichever qualifying scheme they wish to enrol their employee. It is important to choose a scheme who are free to use, fast to setup, and are guaranteed acceptance - which means they accept employers employing only one person. TRUST|Pensions® has a simple, secure and free sign up and set up service, which you can use or ask your payroll provider to do for.  The scheme is a guaranteed acceptance master trust, so welcomes all employers.

STEP 5:  Don’t forget to complete your Declaration of Compliance with The Pensions Regulator!
STEP 6: Ongoing Assessment & Communications

You have obligations for ongoing assessment and communications of your employee.  Your payroll provider can assist you with this, or we can. You can let us know during the sign up process.