Pensions auto-enrolment - latest news
25th July 2013
It's been dubbed the biggest shake-up of pensions in a generation, and will result in millions of workers being pushed into saving money for their retirement for the first time. Yet many employers are still in the dark about auto-enrolment.
The automatic pension enrolment system was introduced in October last year to encourage more individuals to save towards their retirement, with the number of employees signed up recently hitting the one-million mark after the Government started by targeting the UK’s biggest firms.
Under the scheme, employers must automatically enrol workers who choose not to opt out and who are not in an existing qualifying pension scheme, are aged 22 or over, are under State Pension Age, who earn more than £9,440 a year (in 2013/14) and work or usually work in the UK.
Employers will be required to contribute a minimum amount into the scheme on behalf of their workers. These will be phased in but are currently set at a total contribution of two per cent with at least one per cent of this coming from employers. These are then set to rise, meaning that by 2018 the total contribution will be eight per cent, with at least three per cent coming from employers.
The Government hopes the system will ease a pension crisis which has seen recent figures from the Office for National Statistics showing that the number of people paying into a company pension plan had reached the lowest level for 60 years.
As the Government continues to roll out the pension programme, companies with between 62 and 89 employees are this month receiving their staging date letters. Between now and 1 April, 2014, letters will follow to employers with between 50 and 62 staff and from receiving notification of their staging date businesses will have 12 months to comply with the new duties.
Employers should therefore be drawing up an action plan now, involving payroll, HR and possibly outside professional advice. You need to work out how any existing scheme fits in with the regulations. If you don’t have one then you’ll need to find one, and also assess your workforce in terms of who is eligible and who isn’t. You also need to consider who your provider will be, and work out how much it’s going to cost. Why is this so important? Well, basically, because it’s a compliance issue to stay on the right side of the law. Get it wrong and you could be facing some fairly hefty penalties.