Getting an apprenticeship is an excellent way to kickstart your career, a successful way to navigate the first steps on the career ladder. Winter is, season when Government scheme is promoted in schools and live events, but this year the pandemic has moved all promotional efforts online. What are the wider implications of apprenticeships on workplace pensions, and what can you do about them?
Here, we look into apprenticeships to ensure that you can get the utmost out of them, without needing to worry about the effects they may have on your pension. Given that most apprenticeships pay very little, it can be stressful to think about delaying starting a pension. However, we describe how you can work around those issues to help support both your career and your retirement. Lastly, it is always advised to seek your own personal pension advice to ensure that the plans you have in place will provide you with enough money to live, when your retirement comes.
Apprenticeships: what are they?
The option of an apprenticeship is available to anyone over 16 who is not in full-time education and lives in the UK. Schemes differ somewhat from nation to nation. However, each scheme means an individual can work in a hands-on job role whilst also studying for a qualification. It gives that individual the ability to get some real-world experience, while also gaining the education needed to do the job.
Qualifications can range from GCSEs to NVQs, that apprenticeships can help individuals’ study towards, depending on what the job role entails. Significantly, apprenticeships can vary in levels of difficulty. The initial level is Intermediate which is equivalent to five good GCSEs. The highest level is a degree apprenticeship which is on par with a Bachelor’s or a Master’s. They are available for most industries – from accounting to transport.
The wage that an apprentice can hope to receive will vary. If you are under 19 years old, or just beginning your first year as an apprentice, you will earn £4.15 an hour. If you are over 19 and have completed your first apprentice year, you will get paid the minimum wage. As of April 2020, this is as follows:
£6.45 for 18-20 year olds,
£8.20 for 21-24 year olds
£8.72 for those above 25.
However, some employers are generous and may opt to pay you more than this in addition you are entitled to sick pay. As an apprentice, your hours are capped at 40 hours a week, but no fewer than 30. You can also take advantage of some of the benefits that your employer provides for their full-time workers too – like childcare vouchers and holiday.
Pensions for apprentices
It may sound cliché, but it is never too soon to begin saving – even pensions for children are not ridiculous. Doing this can aid you with building up the largest pension pot possible for your retirement – while having the least amount of impact on your net salary. By saving sooner, with a bit each and every month, you will feel the effect of putting that money away less than if you start it until later on. The later you leave it, the larger the portion of your salary that will have to be put away regularly to build up a pension fund that can sustain the lifestyle you want in retirement.
When it comes to pensions for apprentices, putting money away is harder given that you will be earning the minimum wage. Yet, it is still possible. Think about how the job specific skills you learn will put you ahead in the future when it comes time to get a better paid job. You may be a far more employable prospect in comparison to your competitors.
When does an employer contribute to my pension? Pension auto-enrolment criteria
It may be easy to think that as you are an apprentice, you do not have enough funds to be putting aside any into a workplace pension scheme, this is not necessarily the case. It is more likely the case that you are not entered into any workplace pensions through pension auto-enrolment.
To be put into the pension auto-enrolment, you need to fit the criteria below (in the tax year 2020-21):
Qualifying earnings: £10,000
Age: The minimum age for auto-enrolment is 22. However, even if you do not meet the auto-enrolment qualifying age, you have the ability to access your employer’s workplace scheme if you earn over £6,240
It is possible for apprentices to have access to pensions like other workers. For example, it could be the case that you are someone who earns more than £6,240 even if you are under 22. If you choose to pay into the scheme, then your employer has to also – as they will do with regular employees. If you do this, then they must pay 3% of your earnings into your pension. You can still join the scheme if you earn less than £6,240. However, employers aren’t obligated to pay in as well.