Your pension scheme will have to ensure that it meets all of the minimum requirements; that is has a valid contracting-out certificate, or that it provides a broadly equivalent benefits which are given in a contracted-out.
If you are in a defined contribution scheme then you will be able to get tax relief as a percentage of your earnings. This means that money that would have previously gone to into tax will now go into your pension. Under the new pension changes the government has set a minimum percentage that has to be contributed in total, these contributions will come from you, your employer and from the tax relief and will be worked out as a percentage of your earnings.
Timings: Minimum Total Percentage that has to go into your pot:
October 2012 to September 2017 2%
October 2017 to September 2018 5%
October 2018 onwards 8%
Contributions to the pension scheme can exceed this minimum. Within that total contribution, the government has also set a minimum percentage that has to be contributed by the employer. This will also increase gradually over time.
Timings: Minimum that has to be contributed by the employer:
October 2012 to September 2017 1%
October 2017 to September 2018 2%
October 2018 onwards 3%
Employers will be able to contribute more than the minimum if they wish; many already do.
These minimum percentages do not apply to all of your salary, but on what you earn over a minimum (currently £5,564) up to a maximum limit (currently £42,475).
This is just a basic summary of the scheme and we would recommend you speak to an IFA to find out exactly what these new changes will mean to you.
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