The Government has confirmed that the requirement for employers to automatically enrol staff into a pension plan will go ahead.
The rules intend to make employers responsible for ensuring that all employees contribute to their retirement by using in-work pension schemes. It means that employers must enrol employees into a pension scheme that both the employee and employer contribute.
Auto enrolment should significantly increase the number of people saving for their retirement, which should benefit many people. However it will increase employment costs for many employers, both in terms of the obligatory pension contributions and administration.
Although the rules do not start until at least October 2012, it is important to plan early. The following questions and answers provide some basic information about the changes.
If you would like to find out more about pensions auto enrolment and how we can help with the implementation, please phone our Financial Planning team on 01242 680000.
When does auto enrolment start?
The start date for auto enrolment is phased, based on the number of employees an employer has. The largest employers will be included from October 2012 with all employers covered by September 2016. Click here for a schedule of the phasing in dates. Do all employees have to be auto enrolled?
All eligible workers must be auto enrolled within three months of employment. Employees can opt-out up to one month after the enrolment (but employers are not allowed to encourage this).
Eligible workers are those earning over the personal allowance (£7,475 in 2011/12) and aged between 22 and the state pension age.
What are the minimum contributions?
The minimum contribution levels will be phased in between October 2012 and October 2017.
- October 2012 to September 2016 – total minimum of 2% of qualifying earnings with at least 1% from the employer.
- October 2016 to September 2017 – total minimum of 5% of qualifying earnings with at least 2% from the employer.
- From October 2017 – total minimum of 8% of qualifying earnings, with at least 3% from the employer.
What happens if an employer already has a pension scheme or National Employment Savings Trust (NEST)?
Employers can use their own existing schemes, as long as they meet certain minimum requirements, or NEST.
What do employers need to do?
Employers need to consider how the auto enrolment rules will affect them, such as:
- What needs to be done to comply with the new rules and how much will it cost
- How auto enrolment will impact their current benefit and pension arrangements
- Whether to change existing pension scheme contribution rates
For more information about pensions auto enrolment, please phone our Financial Planning team on 01242 680000.
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