Auto-Enrolment

Following the recent announcements in the media, the news that employers will have to pay into a pension scheme for their employees may come as a bit of a shock.

The Government has introduced auto-enrolment and the National Employment Savings Trust or NEST for short.

Preparedness and planning is the key to ensuring that this does not cause disruption for employers.

The first thing employers should do is establish their staging date, i.e. the date that they actually have to start auto-enrolment. To do this go to this link and follow the on-screen instructions.

The process of auto-enrolment will be phased in over the next 6 years, starting with employers who employ 120,000 or more staff from October 2012.

Staff that will need to be automatically enrolled will be:

• Aged between 22 and state pension age.
• Work in the UK.
• Someone for whom an employer deducts income tax and National Insurance contributions from their wages.
• Someone who is likely to have gross earnings over £8,105 (This figure will be reviewed annually by the Government) in a year.

Staff that employers need to offer enrolment to but are not automatically enrolled will be:

• Earning between £5,564 and £8,105 per annum.

Even where staff work for an employer for a very short period of time (i.e. for 1 day), if they fall into the above categories, a contribution towards their pension will need to be made (earning over £22.21 gross per day).

Employers can use the NEST scheme or obtain their own pension scheme as an alternative that qualifies under the new rules.

From 1 October 2018 onwards the minimum contribution to a scheme is 8% of qualifying earnings, of which the employer has to contribute 3%.

If you are an employer and you would like to understand more about your obligations or are seeking advice please contact us on 01626 833225.

Please note that the above article does not constitute financial advice.