Some people choose to work as a temporary worker for a number of reasons.
For instance, the hours might offer you more flexibility around your lifestyle.
Or in the care industry, organisations might prefer contract work.
But what does this mean for your pension?
Does an employer have to pay you one? Do you need to save money yourself?
Whether you like it or not, it’s very important to save for a pension.
If you don’t, you could have to work until you die and won’t be able to enjoy the fruits of your labour later in life.
With this in mind, we’ve put together a handy guide filled with top advice from The Pensions Regulator (TPR).
This should help clear up any grey areas and ensure you can start saving for your future.
Will you qualify for a pension?
Auto-enrolment is the responsibility of all employers for employees who fall within the threshold.
Every employer will assess every temporary member on an individual basis, taking into account that they:
– may only work for you for a short period of time
– could leave in the middle of pay periods
– will earn different amounts.
As a general rule, the answer to this question usually depends on an employee’s age and how much they earn – otherwise known as the thresholds for auto-enrolment.
For example, if a temporary worker is aged between 22 and the State Pension Age and earn over £192 a week/£833 a month/£10,000 a year, an employer must contribute to their pension.
As a temporary worker, you must not already be in a qualifying pension scheme to receive a contribution as well.
If you’re earning less than £6,032 a year, your employer doesn’t have to make a contribution to your pension unless they choose to.
It’s worth noting that companies or organisations can use postponement to minimise the amount of admin work they have to fill out with temporary or seasonal workers.
Postponement will delay the assessment of whether an employee qualifies for up to three months.
The employer must decide on a set deferral date in which the last day of the postponement period ends and tell the employee with a detailed notice.
You can find out more about this process from TPR.
What happens if you’re under the age of 22 but earn over £10,000 a year?
If you’re a temporary or seasonal worker aged between 16 and 21, your employer doesn’t have to automatically enrol you in their workplace pension.
However, you do have the right to join if you want.
In which case, your employer will then have to make a contribution matching your own.
You would also get a contribution from the government, classed as tax relief.
The same principle applies if you’re earning more than £10,000 and are State Pension Age or older.
What happens if you have several employers?
If you are juggling more than one job, you can be auto-enrolled in a pension for each employer, providing you meet the criteria.
In terms of salary, this means you have to earn more than £10,000 a year for each job.
You can make other plans regarding your pension, by setting up a personal one.
There are three types of personal pensions, including:
Basic personal pensions – where you make monthly payments into a plan. This can offer a huge array of investment strategies to suit your needs.
Stakeholder pensions – you’ll contribute a low and flexible amount, but will have capped charges and limited choices with your strategy.
SIPPs (self-invested personal pensions) – if you want to contribute larger amounts and have more control over the way your pension savings are invested, a SIPP is ideal. However, it does bring a higher charge, so it’s worth doing your research beforehand.
To work out whether a personal pension is right for you, it’s worth planning ahead and working out how much you need to retire.
For example, will you have enough in the event of an unexpected bill or special medical bill?
Craig Palfrey, the director of IncreaseYourPension.co.uk says:
“Retirees have to test out any plans against their position being that of an outlier”.
“You might receive a number saying you are likely to live to 86 on average, but what happens if you live to 106?”
Realistically, if you believe you need £10,000 a year to live off, you should factor in an extra half of this figure. So in this case, £15,000 a year.
This will cover any extra things you need money for.
It’s also worth thinking about all the things you ever wanted to do. When you retire, you’ll get more time to tick things off your bucket list – so it would be a shame if you didn’t have the money to do everything.
And then there’s the serious case of care costs. Unfortunately, as you get older, you may need some extra assistance or wish to live in a care home.
These fees can cost a lot, so it’s important to take these figures into account.
It’s always worth talking to your employer or a financial advisor to ensure you’re doing what’s best for livelihood in the long-term.
If your temporary employer is making a contribution, have a think about how much it is and whether that will benefit you when you’re longer.
If it’s quite low, or you’re earning below the threshold, it’s definitely worth considering a personal pension plan.
Your older self will certainly thank you for it!
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