Pension auto-enrolment is part of the UK Governments overall Workplace Pension Reform strategy. All UK employers will be affected and will have to take action by their “staging date”. This is determined by the business size as at April 2012 with large employers commencing from October 1st 2012 and all companies including smaller ones having to act by April 2017.
The new law requires all employers with one or more workers to automatically enrol certain members of their workforce into a “qualifying” workplace pension scheme into which they must also make contributions.
On the staging date employers will have to automatically deduct a minimum of 1% of all eligible employees “band earnings” and pay this into the pension. Employers will also have to pay the minimum 1%. Band earnings are currently defined as all earnings between £5,564 and £42,475 per annum although it is possible for employers to adopt a different (higher) contribution basis.
All employers will be put on this basis by April 2017. This contribution level will then increase to 3% employee and 2% employer on 1st October 2017 and to 5% employee and 3% employer by 1st October 2018.
There are three defined bands of employees "eligible jobholders", "non eligible jobholder" and "enitled workers"
Eligible Jobholders encompasses all employees between age 22 and State Pension Age, who earn more than £8,105 pa. Employers have the option to pay more than these amounts, but these will be the statutory minimum. Full details are available via the links on the right.
Employees will be able to “opt out” of the scheme and employers will need to facilitate this and then automatically re-enrol staff every three years.
Employers have the flexibility to use an existing pension arrangement (as long as it “qualifies”) or put in place a new scheme if this better suits their requirements. A new quasi Government scheme called NEST has also been introduced which every employer, regardless of size, is able to use should they wish.
Full details of all the above are given in this section.