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Pensions and Nannies – the facts

by ParentalChoice
in Financial Planning, Childcare
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If you already employ a nanny you will no doubt be aware of the fact all employers must contribute to a pension but for potential nanny employers this might sound like a scary prospect. If you are already an employer you will have probably by now heard when your staging date is i.e. the date you must start contributing to your employee’s pension (if not ask your payroll company!) but may not know what that entails. If you haven’t received your staging date details yet, you will need to know that all employers need to be signed up by February 2018.

For new employers of nannies you will be guided individually as to when you need to set up a pension scheme but it is now something you must factor into the process of becoming an employer. Pension contributions are not just simply a benefit that is nice to provide to your nanny, but something required under the Pensions Act 2008 by all employers. As an employer it is your responsibility to understand your duties and comply with the regulations but you are not alone.  This is one of key reasons why it is advantageous to have a Payroll company, such as Parental Choice, supporting you and be on hand to give advice at all stages.

Is my Nanny Eligible for a pension?

A eligible person is someone over 22 and bellow state pension age, who works in the UK, is not already in a workplace pension and earns more than £490 per month. Parents can choose in which scheme to enrol their nanny but the default and practical option is the government scheme NEST (www.nestpensions.org.uk), and is portable meaning Nannies can continue to use the same pension if and when they change jobs.

How much do I have to pay?

Pension Contributions will be based on your nanny’s gross earnings including overtime and bonuses. It is therefore, now more than ever, important to agree a gross salary with your nanny.

Currently, both employers and employer have to pay 1% of the nanny’s gross salary (on earnings between the threshold currently £5876 and £43,000 per annum) each into the pension scheme. From April 2018 this will become 2% from the employer and 3% from the employee.

Can my nanny opt-out?

An employer will have to set up a pension scheme and register the employee (if they meet the eligibility criteria) initially but then the employee has a month in which they can opt out if they choose to. They are entitled to re-join at any time and an employer has a duty to automatically enrol employees back in every 3 years provided the employee is still eligible.

Employers will not be able to entice Nannies to opt-out by offering higher salaries or one-off bonus due if an employer is found to be doing this!

Confused?

Pension auto-enrolment may sound complicated but Parental Choice is here to help.   We are here to work on your behalf should you need any more information on what auto-enrolment will mean for you.  We can help with the calculations and determining the financial implications for you and your family.  We will also take care of all the registration and administration involved.   Monthly payroll administration fees per employee start at £200 per annum with pension services charged at £75 per annum.  Please call us today on 020 8979 6453 or email the payroll team on  payroll@parentalchoice.co.uk

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