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Pensions and Nannies – the facts

by ParentalChoice
in Financial Planning, Childcare
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If you already employ an eligible nanny, you will no doubt be aware of the fact that as their employer you must contribute to a pension.

For new employers of eligible nannies you will need to set up a pension scheme from the commencement of their employment.  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?

An eligible person is someone aged 22 and over and below state pension age, who works in the UK, is not already in a workplace pension and earns more than £503 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). As a NEST pension is portable it means 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, employers pay 2% and employees have to pay 3% of the nanny’s gross salary (on earnings between the threshold currently £6035 and £46,350 per annum) each into the pension scheme. From April 2019 this will become 3% from the employer and 5% from the employee (and thresholds are likely to change each tax year).

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 must not entice Nannies to opt-out and if an employer is found to be doing this they maybe fined up to £10,000 by the Pensions Regulator.

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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