The most radical reforms to workplace pensions came into force on 1 October with the introduction of the automatic enrolment scheme. Under the scheme, employers are required to automatically enrol workers in a workplace pension scheme and make mandatory contributions, unless they are already members of a qualifying occupational pension scheme. In order to qualify for auto-enrolment, workers must be between 22 and state pension age and earn over £8,105 a year. The 'qualifying earnings band' (between £5,564 and £42,475 for 2012/13) and the 'earnings trigger' for automatic enrolment will be reviewed annually.
Kate Fretten, Employment Partner, says "The scheme will initially only apply to the UK's largest employers (i.e. those with 120,000 or more members in their PAYE schemes), but will be rolled out across all workplaces within the next five years. Each employer will be contacted by the Regulator six to 12 months in advance of their respective staging date."
Under the new regime, employers are required to:
- automatically enrol 'eligible jobholders' into a qualifying pension scheme;
- contribute a minimum of 3% of a worker's earnings. The worker's total combined contributions must be at least 8% of their earnings. However, this level of pension contributions will be phased in over time to help employers and individuals adjust. Full contributions will have to be paid from 1 October 2018;
- check if any existing scheme is a qualifying scheme meeting the relevant standards and minimum requirements for that scheme type;
- tell all workers what kind of scheme has been chosen;
- tell all eligible jobholders that they have been automatically enrolled and that they may opt out if they want to;
- tell any other workers that they can opt in to the pension scheme; and
- register with the pensions regulator to provide details of the qualifying scheme chosen and the number of people that have been automatically enrolled.
Get in touch if you need more information on this topic. You should find the other articles in November's employment newsletter of interest.
For a free initial meeting please call 01202 499255 and Kate or Paul will be happy to discuss any questions you may have.