Introduction to Pensions for Nannies

Are all nannies automatically added to a workplace pension scheme?

No.  There is criteria to be met for auto enrolment pensions. 

- Nanny must be earning at least £10,000 gross per year.

- Nanny must be aged at least 22 and under state pension age  (check state pension age)

- The parents (employer) must have reached their pension staging date.  Parents can delay for three months from their pension staging date, this is called postponement.  Postponement is designed to give employers time to set up the pension scheme.  From October 2017 first time employers of nannies will have to provide a pension scheme immediately unless they opt for postponement.

Can nannies paid less then £10,000 choose to join a workplace pension scheme?

Yes, they can ask to be opted in to the pension scheme. Parents do not need to make employer pension payments unless their nanny earns over £490 gross per month.

As a nanny, how much do I pay towards my pension?

Prior to April 2019, the minimum employee contribution is 1% of qualifying earnings. This percentage can include the 20% tax relief added by Government, which makes the minimum payment from qualifying earnings being 0.8%.

What is meant by 'qualifying earnings'?

Many nanny pension schemes are run using the qualifying earnings method. For the 2017/18 tax year, the band for qualifying earnings has been set by Government at £5876 to £45,000. In practice this means that £5876 of income is ignored and the remainder of the nannies gross annual salary is used for the pension payment calculation.

For example… if the nanny earns £18,000 gross per year, their pension payment would be based on £12,124 (£18,000-£5876). At 0.8% the nanny would have £97 deducted from their gross pay. The employer would pay 1% which is £121.24. From April 2018 these percentages rise to 2.4% for the nanny and 2% for the employer.

Why should I save for my retirement?

The state pension may not exist when you retire or may be radically different to how it is now. You should view the state pension as being an added benefit if it exists when you retire. Therefore you need to start planning for your financial future as early as you can, as with any investing the longer you are in the market the more opportunity your money has to grow. A pension is an investment which is managed for you and if well managed the money you put in will grow over a long period of time. Once you reach pension age, you will able to access the money on a regular basis which is known as drawdown.

As a nanny where can I find out more about pensions?

The Money Advice Service has been established as an independent body to educate people in the UK to improve money management. From April 2011 they have been providing online, telephone and face-to-face advice. 

As a parent employing a nanny, who can I contact for guidance about creating a pension scheme?

Your nanny payroll provider should be your first point of call as many will be able to create a pension scheme for you and show the pension payments on your nanny's payslips. If you are running payroll yourself, the pensions regulator has guidance for employers.