Setting up a nanny pension

September 28, 2015

Don’t rush to set up a workplace pension for your nanny until you’ve read our guide. You might not even need to have one.

As you probably know, the rules about workplace pensions have changed, which means if you employ a nanny to take care of your children you might have to provide a nanny pension.

The workplace pensions rules state that if your nanny is aged 22 or over (and under state pension age), and they get paid over £192 a week or £833 a month, you’ll need to provide a pension.

Don’t rush to set up your scheme

There have been a few scary stories in the press about nanny pensions. But don’t panic just yet. Even if you’ve had a letter from The Pensions Regulator with a staging date, there’s no need to spring into action straightaway.

A lot can change between now and your staging date. Here’s a few reasons why you might not need a pension:

  • Your nanny might leave before your staging date
  • You might need to reduce the number of hours your nanny works so they won’t need to be automatically enrolled
  • Your children might start school and you have to rethink your childcare
  •  You might have another baby and take maternity leave and not need a nanny until you return to work
  • If your nanny earns less than £833 a month then you might not need to set up a pension scheme.

Talk to your payroll bureau

If you use a payroll bureau to pay your nanny then speak to your account manager about your pension options. If they’re up to speed on workplace pension legislation then they can help you to work out if your nanny qualifies to be enrolled into a scheme and give help on choosing and setting up the pension. Your payroll company can set up your pension, work out employer and employee contributions  and make deductions on your behalf.

As you employ only one person then it will take a few weeks to get a pension scheme up and running if you’re using a payroll bureau to do this for you. So don’t make any costly decisions now as you don’t want to pay to set up a pension that you’ll never use.

How much will a pension cost?

Pension contributions are being phased in and both you and your nanny will have to contribute a minimum percentage of salary each month.

DateEmployer minimum contributionEmployee minimum contribution
Before 5 April 20181%1%
6 April 2018 – 5 April 20192%3%
6 April 2019 – onwards3%5%

On a salary of £20,000 that works out to a contribution of £11.81 a month for you and the same for your nanny, until 6 April 2018, when it will go up.

What if your nanny doesn’t qualify?

If your nanny is paid less than £192 a week or £833 a month and doesn’t automatically qualify for a workplace pension, you won’t need to have a pension set up at your staging date. But you’ll still need to go through the motions ie let your nanny know about workplace pensions and complete a declaration of compliance.

The Pensions Regulator has templates for you to use to write to your nanny.

Your nanny may ask to join a scheme and if this happens you’ll need to set one up. Not every provider will allow you to set up a pension after your staging date, but there are some that do.

If your nanny earns between £486 and £833 a month you’ll have to set up a workplace pension and pay into it; you’ll you’ll have six weeks from staging date to set it up.

If your nanny earns less than £486 a month and wants to join a scheme, you’ll need to set one up but you won’t have to contribute and there’s no deadline for setting the scheme up.

Want some help with your workplace pension?
Pay My Nanny can help you with your pension choices, pension set up and ongoing management
Get in touch at [email protected] or by phone 01373 482050