Do You Need to Provide a Pension for Your Nanny?

Yes, you will almost certainly need to provide a workplace pension for your nanny. When you hire a nanny, you are a legal employer. Under UK law, all employers must set up a pension (known as "auto-enrolment") for any employee who is aged between 22 and the State Pension age and earns £10,000 or more per year.

When you're working through your nanny employer checklist, you'll quickly come across 'pensions'. It's a topic that can seem complex, but the rules are actually very clear.

Because your nanny is your employee, you are legally bound by the same auto-enrolment pension rules as any other business in the UK. Failing to comply can lead to significant fines from The Pensions Regulator.

Here’s a simple breakdown of what you need to do.

When You MUST Auto-Enrol Your Nanny

You are legally required to automatically enrol your nanny into a workplace pension scheme if they meet all of the following criteria:

• They earn over £10,000 per year. This is the "earnings trigger," which breaks down to £833 per month or £192 per week.
• They are aged 22 or over.
• They are under the State Pension Age.

If your nanny ticks all three boxes, you don't have a choice—you must enrol them. This is not optional.

What if My Nanny Doesn't Meet the Criteria?

Even if your nanny isn't eligible for auto-enrolment, they may still have the right to a pension. The rules are split into two other groups.

1. The Right to "Opt-In" (You Still Have to Pay)

Your nanny has the right to "opt in" to a pension if they:

• Earn between £6,240 and £10,000 per year.
• Are aged 16-74.

If they ask to join, you must set up a pension for them and you must pay the minimum employer contributions.

2. The Right to "Join" (You Don't Have to Pay)

Your nanny has the right to "join" a pension if they:

• Earn less than £6,240 per year.
• Are aged 16-74.

If they ask, you must set up a pension for them, but you are not legally required to pay employer contributions.

How Much Does the Pension Cost?

This is the key question for budgeting. Under the auto-enrolment scheme, there is a minimum total contribution of 8% of your nanny's "qualifying earnings."

This 8% is split between you (the employer), your nanny (the employee), and the government (in the form of tax relief).

• You (Employer) Pay: A minimum of 3%
• Your Nanny (Employee) Pays: 5% (This is made up of 4% from their pay, plus 1% in government tax relief).

What are "Qualifying Earnings"?

These contributions are not calculated on your nanny's entire salary. They are only calculated on the portion of their salary that falls between the Lower and Upper Earnings Limits.

• Lower Limit: £6,240 per year
• Upper Limit: £50,270 per year

Example:If you pay your nanny a gross salary of £30,000 per year:

1. You ignore the first £6,240.
2. The "qualifying earnings" are £30,000 - £6,240 = £23,760.
3. Your 3% employer contribution is calculated on this figure: 3% of £23,760 = £712.80 per year, or £59.40 per month.

A Warning: Net vs. Gross Pay

Pensions are one of the biggest reasons you must never agree to a net salary.

If you agree to a fixed take-home (net) pay, your nanny's 5% contribution cannot be deducted from it. This means you, the employer, would be forced to pay your 3% and their 5%, dramatically increasing your costs. By agreeing on a gross salary, the 5% is correctly deducted from the nanny's pay.

📋 Your Legal Duties as an Employer

Setting up a pension involves more than just making payments. You are legally required to:

1. Choose a Pension Scheme: Most nanny employers use a simple, government-backed scheme like NEST.
2. Assess Your Nanny: You must formally assess your nanny's age and earnings in every single pay period.
3. Send Legal Letters: You must write to your nanny (known as "statutory communications") to inform them about their pension rights.
4. Enrol and Pay: If they're eligible, you must enrol them and make your contributions on time.
5. Declare Your Compliance: You must fill in a "declaration of compliance" and submit it to The Pensions Regulator to prove you have met your duties.

Can my nanny just "opt out"?

Yes, even if your nanny is eligible and you auto-enrol them, they have a one-month window to "opt out" and get a refund of their first contribution.

However, you cannot encourage them to opt out or treat it as an alternative to doing your legal duties. You must enrol them first. It's also important to know that every three years, you are legally required to re-enrol them, at which point they would have to opt out again.

How to Make Nanny Pensions Simple

Yes, this is a lot of legal admin. The letters are fiddly, the deadlines are strict, and the compliance can be stressful.

That is exactly why Quinn exists.

Our payroll service takes care of everything for you: From registering you with The Pensions Regulator and setting up your NEST scheme, to sending the legal letters and managing all the contributions and deductions on every payslip.

Fully digital, no paperwork, no stress. We make being a compliant employer simple.