Pensions auto-enrolment/work place pensions
Automatic enrolment (or auto-enrolment) is a government initiative designed to help more people save for retirement. By 2018, all employers will be legally required to enrol eligible workers into a qualifying workplace pension scheme, although workers can opt out.
As an employer, auto-enrolment means that you will need to enrol workers:
- not already in a suitable workplace pension scheme
- working with qualifying earnings who wish to join the scheme
- aged between 22 and state pension age
- who work in the UK
- for whom they deduct income tax and national insurance from wages
- who earn more than £10,000 gross (in the 2014-15 tax year – the figure will be reviewed annually).
The date when employers need to start auto-enrolment is called the staging date and is based on the size of their PAYE scheme on 1 April 2012. Employers with 50 or fewer workers will start to come on board from April 2015. Use the Pensions Regulator staging date calculator to check if the new law applies to you and when you’ll be enrolled. The calculator is for employers but also works for employees.
As an employer, a key issue for you will be planning for the costs involved in auto-enrolment, including the contributions you must make to pensions – a minimum percentage, based on a band of earnings (between £5,772 and £41,865 in the 2014-15 tax year, including overtime and bonuses).
Until 30 September 2017, your minimum employer contribution will be one per cent, rising to two per cent between 1 October 2017-30 September 2018 and three per cent from 1 October 2018. Alternatively you can choose to contribute more.
Employees will also contribute, with the total (employee and employer) minimum contribution set at eight per cent from 1 October 2018.
If you do not have an existing pension scheme, the following schemes have been set up to cater for the employer of a small or medium-sized business; NEST, NOW: Pensions and the Peoples Pension. We have accounts with each provider and can assist you with the setup.
If you already have a scheme, you will need to seek specialist advice, for example, from a pensions adviser, to ensure that it meets auto-enrolment criteria and to implement any changes necessary to bring it into line.
Alongside these responsibilities, other issues you will need to address include dividing your workers into three different categories, based on age and earnings, each of which have different rights, entitlements and employer communication obligations.
The best way to get auto-enrolment right is to start planning as early as possible by taking expert advice. At Newsham Hanson, we can assist you with a wide range of auto-enrolment responsibilities, including assessing existing pension schemes for eligibility and setting up new schemes.
For more information regarding your employer responsibilities under auto enrolment, please contact us.
Further information on pension reform is available at www.thepensionsregulator.gov.uk
