Pensions for nannies
Most nanny employers choose to do this with NEST, so the nanny has just one pension pot, which each of her employers pays into.
Very few. The very young (21 and younger) and those over pension age don’t normally require a pension. In most cases, it is possible to postpone assessment for 3 months, so that effectively excludes short-term temps. Everyone else falls into two categories:
Paid more than £10,000 pa (£192 per week)
These employees must be enrolled in a scheme automatically, After they are enrolled, they must be given a letter explaining what has happened, and giving them the option to opt-out if they so wish. They cannot opt out before they have been enrolled.
Paid less than £10,000 pa (£192 per week)
These employees are not enrolled automatically, but they must be given a letter explaining that they can opt in if they want to.
I’m okay, my nanny is self-employed…
Are you sure? Does she choose when and how to work? Is she paid a fixed fee rather than an hourly rate? Does she run a business, supplying her services to a number of different families? Almost all nannies are employees, in which case treating them as self-employed exposes you to substantial fines and backdated tax, NI and pension charges. You can’t get around this by having your nanny sign a document to say that she is self-employed; in law, employees cannot sign away their statutory rights. If the nature of your relationship is employer / employee, then you must provide a pension along with her other statutory rights. You can get a definitive answer here: https://www.gov.uk/guidance/check-employment-status-for-tax
What does it cost?
Minimum contributions are currently 2% for employer and 3% for employee. There is nothing to pay on the first £116 per week (or any earnings that exceed £892 per week).
The employee’s contribution is deducted from pay, so it’s more important than ever to ensure you agree a gross pay rate less deductions (rather than a net pay rate plus deductions). That way the nanny is free to increase her pension contributions as high as she wants, without impacting upon the employer’s costs.
In April 2019 contributions increase again, to 3% for employer and 5% for employee. The impact of the increase in the employee’s contribution will, to some extent, be offset by the reduction in taxation announced in the October 2018 budget.
Alison Hull FCIPP is Company Director at www.nannymatters.co.uk.
NannyMatters provide a fully-managed payroll and pension service for a fixed annual fee. Read Trust Pilot reviews at https://uk.trustpilot.com/review/www.nannymatters.co.uk
If you have any questions about nanny payroll or pensions you can email Alison at email@example.com