Between October 2012 and 2018, all UK employers must have complied with the new government initiative and have enrolled all eligible staff into a new ‘Workplace Pension’, a process known as automatic enrolment. Employers will each be allocated a staging date, which is the date by which they must launch the new Workplace Pension scheme for eligible employees. Failure to comply could mean penalties and enforcement actions being taken against the non-compliant employers.
Who pays in?
- Employees who do not opt out of the scheme* will pay a minimum percentage of their earnings above £5,668 (figure correct at time of writing);
- Employers will also contribute to the pension fund for employees;
- The Government also helps because payments into the scheme are, in effect, tax-free.
What date do employers have to launch the scheme?
The date that the scheme goes live will vary from one employer to another, based primarily on the number of employees in the organisation. Larger employers will launch earlier (from October 2012) while those employing only a few employees will launch later (up to 2018). The exact launch date is known as the ‘staging date’ and employers can find out their own particular staging date by visiting this link and entering their PAYE reference. The Pensions Regulator advises that, once they know their staging date, employers should begin preparations at least 12 months in advance.
A quick PDF guide to preparing for automatic enrolment can be found by right-clicking this link or by visiting the Pensions Regulator help area. Tools for creating an employer’s action plan are also available, here.
Eligible staff are employees who:
- are employed in the UK;
- currently earn £9,440 per year, or more
- are 22 years old, or over, but below state pension age;
- are not in a qualifying pension scheme already.
Nearer the time the system goes live (the ‘staging date’), employees will be contacted by letter to explain what is happening and what they will have to do, and by when.
Can employees opt out?
Employees are automatically enrolled into the new Workplace Pensions scheme, however they are offered an initial 30 day opt-out period as well as being able to opt out at any time after enrolling.
Types of Scheme
There are 5 different types of Workplace Pension scheme which employers can set up:
- A Defined Contribution scheme;
- A Contract-based Defined Contribution scheme;
- A Defined Benefit scheme;
- A Stakeholder pension scheme;
- A Hybrid pension scheme.
If an employer already has an existing pension scheme in place it may sometimes be possible to convert certain aspects of it so that it then qualifies as an automatic enrolment pension scheme. Further information is available here.
Guy Bridger Ltd. can recommend a financial adviser who will be able to advise employers on the most appropriate scheme for their business. Give us a call on 0208 761 8000 or contact us by clicking here.