Pensions Focus

Have you just employed a nanny for the first time? It can be pretty overwhelming to see all the paperwork that comes with taking on a new employee and this includes the pension ‘auto-enrolment’ scheme, which you are required to provide by law. We have answered below a few common questions that come up with new nanny employers:

Does my nanny have to be enrolled in a pension?
Yes, if they are over the age of 22, under state retirement age and earn more than £10,000 pa.

When does the pension scheme start?
You can postpone entry for up to 3 months from the employee’s start date if you want. We recommend that all new starts are postponed for 3 months, to ensure that they have settled in and completed their probationary period. They can choose to go in earlier if they want.

What if my nanny doesn’t want to go into a pension?
Your nanny can choose to opt out of the pension at any time (but as an employer you cannot encourage this), however, by doing so they will miss out on the valuable employer contribution plus tax relief from the government on any contributions they make. Every three years, an eligible employee who opted out will automatically be re-enrolled and this is done on the basis that people’s circumstances can change and they may now want to start saving. They will of course have the choice to opt out again when that time comes.

If my nanny is under the age of 22 or earns less than £10,000, can they still be enrolled in a pension?
Yes, they can request to go into a pension scheme if they are under 22 or earning less than £10,000, but contributions will only be deducted if they are earning at least £120 per week.

How do I manage my nanny’s pension, I don’t know where to start?
As a NannyMatters client we can provide a fully managed service using the government’s pension scheme called NEST (National Earnings Savings Trust). The fee for this service is just £60 per year, and if your nanny chooses to opt out of the scheme before their pension begins then there will be no charge from NannyMatters and we will complete your declaration of compliance to the Pension Regulator. If you prefer, you can set up your own scheme and look after all the administration and employee communications yourself. You could do this using NEST, or Smart, or any of a range of pension providers but we are not able to give advice on this – you would need to go to an Independent Financial Advisor. We can still carry out the payslip calculations at no charge, per your instructions.

How much will the pension contributions cost me?
Pension contributions are calculated as a percentage of earnings, with nothing at all payable on the first £120 per week, or £520 per month. The employer’s contribution is calculated at 3% of the remainder.  The nanny also contributes, at 5%, but benefits from tax relief so the deduction from pay is only 4%. The tax relief is paid by the government directly to the nanny's pension pot if it is a relief at source scheme like NEST.
If you are a NannyMatters client then you will have been provided with a full salary illustration which will include any pension contributions that would be due after the 3 month probationary period. Contact the team if you would like to see an up to date illustration or have any questions about this article, we will be happy to help.