Automatic enrolment (or auto-enrolment) is a government initiative 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.
I’m an employer. Who do I need to enrol?
You will need to enrol workers:
* not already in a suitable workplace pension scheme
* any working with qualifying earnings who wish to join the scheme
* aged between 22 and state pension age
* who work in the UK
* for whom you deduct income tax and national insurance from their wages
* who earn more than £9,440 gross (in the 2013-14 tax year – the figure will be reviewed annually).
When do I start?
The date when you must start auto-enrolment is called your staging date. This is based on the size of your PAYE scheme on April 1, 2012.
In January and February 2014, employers with between 249-499 employees will start auto-enrolling. Smaller employers will not be far behind, for example employers with 50-61 workers will come on board between August 2014 and April 2015.
As an employer, do I need to contribute?
You must contribute a minimum percentage, based on a band of earnings (between £5,668 and £41,450 in the 2013-14 tax year, including overtime and bonuses). Until 30 September 2017, your minimum contribution will be one per cent, rising to two per cent between October 1 2017- September 30 2018 and three per cent from October 1 2018.
You can choose to contribute more.
Employees will also contribute, with the total (employee and employer) minimum contribution set at eight per cent from October 1, 2018.
But I don’t have a pension scheme.
Then you must put arrangements in place. You can use NEST (the National Employment Savings Trust), which is open to any employer, or you can work with a pensions adviser to set up a new scheme.
If you have a scheme already, you will need to check that it meets auto-enrolment criteria and implement any changes necessary. This may require the assistance of either the pension company or a pension specialist.
It sounds complicated…
It is – and other issues you need to address including dividing your workers into three different categories, based on age and earnings, each of which have different rights, entitlements and employer communication obligations. You also need to think about costs on top of your contributions.
The best way to get auto-enrolment right is to start planning as early as possible by taking expert advice.
Please feel free to contact us by telephone 01775 711333
* Tim Martin FCA – Resident Partner
* Trevor Wilshire FPFS – Chartered Financial Planner and Financial Services Director.
* Mark Hildred (BA Hons) FCA – Managing Partner.