When does my Employer have to do something?
Secondary Pensions will officially start from 1 July 2024 and there are things you and your Employer will need to do before that date. The most important is that your Employer must set up a pension and they will have a deadline for doing it.
Your Employer will be able to tell you when their deadline is, but they must start setting up the pension scheme as soon as possible so they can complete all the paperwork in time.
Your Employer's deadline is based on the number of people working for them and the table below shows all the different deadlines:
|Deadline Date||Number of workers as at 30 June 2024|
|1 July 2024||26+|
|1 October 2024||11-25|
|1 January 2025||6-10|
|1 July 2025||2-5|
|1 October 2025||1|
Your Employer could be liable for penalties for not complying with the law and this could result in fines, or imprisonment (or both) for them.
How will I know if I'm going to be affected by Secondary Pensions?
- If you are aged between 16 and the state pension age, not in full time education, and pay social security contributions you must be automatically enrolled into a pension scheme by your employer. Large employers (26+ workers) are required to enrol their employees by 1 July 2024, with smaller employers having different deadlines. All employers should automatically enrol their employees by 1 October 2025.
Which scheme can be used?
- Your Employer must make sure offer you a pension scheme that meets the legal requirements. They must also offer you a choice of joining their pension scheme or Your Island Pension (YIP). If it is a condition of your employment that you must compulsorily join your employer's scheme, then your Employer does not need to offer YIP as a choice.
- Alternatively, if you have an acceptable personal pension scheme already, you could ask your Employer to pay into that instead, although your Employer is not required to.
What are the contributions?
- Your employer will be able to decide the level of contributions, but they must be the same or higher than the minimum contributions shown below. They can pay all of the contributions themselves so you pay nothing or they can split them between you both, so long as they meet the minimum amounts. Your employer can't ask you to pay their contribution for them.
- The contributions will increase as time goes on. If the Employer is required to have all Employees automatically enrolled by 1 October 2025 you will have to pay at least 1% each, and then from 1 January 2026 this will change to the 2026 rate below:
2024 2025 2026 2027 2028 2029 2030 2031 2032 Employer 1% 1% 1% 2% 2% 3% 3% 3% 3.50% Employee 1% 1% 1.50% 2% 3% 4% 5% 6% 6.50% Overall 2% 2% 2.50% 4% 5% 7% 8% 9% 10%
- The secondary pension contributions are calculated using the same earnings calculation used by your Employer for your social security contributions. This will include any tips they collect and share among all staff, if you receive tips directly from the customer these are not included.
What happens once the scheme is set up?
- If your contract says the pension scheme is compulsory, once your Employer has checked it meets the legal requirements there is nothing else to do.
- If your contract of employment doesn't tell you that you must pay into a pension scheme, your Employer must give you either a Notice of Automatic Enrolment or a Notice of Deferred Enrolment. These notices will have a section for you to complete if you want to opt out of the pension and will tell you the following:
- when you will be enrolled into the pension they have set up
- what the contributions will be
- which pension you are going to be enrolled into
- Your Employer will also need to give you information so that you can compare the pension they have set up and the Your Island Pension (YIP) scheme (if they haven't used YIP).
What are the notices for?
- You will only be given a notice if your pension isn't compulsory in your contract of employment, or you aren't already an active member of the scheme when your employer is required to enrol you into a pension scheme.
- The Notice of Automatic Enrolment means you will be enrolled into your Employer's pension scheme straightaway, unless you either opt to be enrolled in Your Island Pension (YIP) or opt out. The exact date this will happen will be written on the document. This must be given to you at least 7 days before you are being enrolled.
- The Notice of Deferred Enrolment means you will be enrolled into the pension scheme within the next 3 months and the exact date this will happen will be written on the document. This can only be done once, even if they give you a new contract you must be enrolled as soon as you reach the 3 month date.
Why do I need to be given a notice?
- If your employer isn't using Your Island Pension (YIP), you must choose between YIP or your employer's chosen pension scheme and decide which one is best for you. The notice will provide you with information to help make that decision. If you have any questions about the pension scheme, you must contact the pension provider to find out more.
- If you do not want to be in the pension at all, you must think very carefully about whether this is the right thing for you to do and how you will fund your retirement. Your employer must make contributions to your pension if you join the scheme. If you decide not to join you will be missing out on these payments.
- Your Employer is not allowed to encourage or ask you to leave the pension, for example they can't offer more pay or rewards if you were to leave. There are penalties for doing this and if you have concerns this is happening you should contact the Revenue Service.
- If you have decided not to join the scheme you must return the notice by the deadline your employer has given you, if you don't you will be enrolled into the scheme your Employer has set up.
What happens if I want to opt out?
- If you want to leave the pension scheme you will need to put this onto the notice before you return it. If you have already been enrolled into the scheme you will need to write a letter to your employer to tell them you don't want to be in it anymore.
- If you decide not to join the scheme your employer will be required to automatically enrol you back into the scheme every 3 years. They will tell you they are doing this by giving you a Notice of Automatic re-enrolment, you will need to read through this document. Once you have done this you will complete the relevant sections and return it to your employer by the deadline they give you.
What happens if I leave the Island?
- If you leave the island before you retire you will need to speak to the pension provider to find out what options you have for your pension. You might be able to transfer it to another scheme or continue to invest it. If you have only been contributing into the pension for 3 months you will be able to take a refund of the contributions but should speak to your pension provider to find out if this is something you can do and if it is the best option for you.