OCTOBER 1, 2012 saw the long-awaited introduction of pension auto enrolment with a burst of TV advertising taking place in Government attempts to raise public awareness of the changes.
Automatic enrolment requires that employers enrol “eligible jobholders” into a Qualifying Workplace Pension scheme.
This could be NEST (National Employment Savings Trust) or another qualifying scheme established by the employer (for example, a Group Personal Pension or Occupational Pension scheme), subject to the scheme meeting certain conditions.
Due to the scale of the task at hand, to ensure all employers meet their obligations the requirement to auto enrol employees is being phased in (referred to as “staging dates”) with the largest employers going first. In fact, prior to April, 2013, only employers with more than 10,000 employees will be affected with the very smallest employers (those with less than 30 employees) not subject to the requirements until 2017.
Essentially, employers will be required to enrol all eligible jobholders within a month of their auto enrolment date into a suitable workplace pension scheme (unless they are already members of such a scheme). Generally speaking, most employees aged over 22, earning at least £8,105 per annum will be “eligible jobholders”.
There are also compulsory minimum contributions required from both employer and employee.
Although initially these will be low, starting with gross contributions of 1% of qualifying earnings from the employee and 1% of earnings from the employer, they will gradually rise until employers must contribute 3% with an employee contributing 5% (including tax relief).
These contributions are based on earnings between £5,564 and £42,475 (for tax year 2012/13).
If you do not already have an understanding of the auto enrolment requirements and/or you have not yet started your preparations, you do need to be giving this some thought.
It’s easy to think that this is something that you can put to one side until nearer the time, but I would recommend that employers give themselves at least a year before their staging date to sufficiently prepare.
When you think about the preparatory work involved and also the fact that as more companies fall into the regime, the demand for the services of advisers and pension companies will increase dramatically, it would be sensible to get ahead of the game!