Auto-enrolment – are you ready?
Pension reform – Automatic enrolment into compulsory workplace pensions is fast approaching...
“Learning never exhausts the mind.” Leonardo da Vinci
As you may be aware, perhaps from television and advertising campaigns, the Government has introduced “Auto-enrolment pensions” which are compulsory workplace pensions in which employers are required to contribute. Please find below our brief summary of Auto-enrolment.
The Pensions Act of 2008, which became law in 2012, aims to provide a workplace pension scheme for all employees who meet certain criteria and all employers need to be aware of their associated legal obligations and will be required to comply.
Each employer is required to enrol into a workplace pension by their relevant staging date those employees who:
- Are not already in a workplace pension scheme;
- Are at least 22 years old;
- Have not yet reached State Pension age;
- Earn more than the minimum earnings threshold (currently £10,000 per annum);
- Work or ordinarily work in the UK.
We recommend that you plan the introduction of your scheme well in advance of your auto-enrolment staging date as it may take you time to structure a scheme that is right for you and your business.
All eligible employees will need to be automatically enrolled into their employer’s scheme. If they later decide to opt out then they may find that contributions they have accumulated in the scheme will remain within that scheme. Employees choosing to opt out may re-join at a later date if they wish. Plus, each employer has a duty to automatically enrol employees back into the workplace pension scheme approximately every three years to give those who have previously opted out of a scheme the opportunity to reconsider their pensions saving periodically. In addition, non-eligible employees may have the right to opt in to an employer’s workplace pension scheme and the employer may then be required to contribute.
The date by which you as an employer are required to automatically enrol eligible employees into a workplace pension scheme is rapidly approaching. The Pensions Regulator will ensure all employers comply and there are staging dates for enrolment depending on the size of your business.
The approximate staging dates are as follows:
- Employers with 50 – 249 employees: April 2014 – April 2015
- Employers with 49 employees or less: June 2015 – August 2017
- New Employers after April 2012: May 2017 – February 2018
In order to provide you with an outline of costs that you will incur in running a workplace pension scheme, the below table details the minimum contributions that each employer will be required to pay – although there may also be administrative and time implications/costs associated with this process:
|Timing||Minimum Contribution Required by Employer|
|Staging date to Sept 2017||1%|
|Oct 2017 to Sept 2018||2%|
|Oct 2018 onwards||3%|