Workplace pensions - what you need to know
23rd October 2012
Starting from October 2012, every worker who meets the eligibility criteria will be enrolled into a workplace pension. However don’t panic as there is a timetable detailing when businesses will be required to make workplace pensions available and this is determined by the number of employees. I’ve set out the basics of the timetable below.
However just because you as an employer don’t have to respond to the new regime immediately, you should be planning for it now. Again summarised details are below but you will ultimately reach a situation where the minimum employer contribution to the employee’s pension is 3%.
Only employers with over 50,000 staff will be forced by law to offer their workers a company pension scheme in 2012.
However, by next year any employer with more than 500 staff will be obliged to set up and contribute into a workplace plan for its employees.
In 2014 those employers with 250- 500 staff will be affected, whilst employers with less than 250 but more than 50 staff will be subject to the same rules between 1 April 2014 to 1 April 2015.
Employees with less than 50 but more than 30 staff will be affected from 1 August 2015 to 1 October 2015.
Finally, employers with less than 30 staff will be obliged to contribute from 1 January 2016 to 1 April 2017.
The rules for staging within each size grouping have still to be confirmed.
The contributions are also being phased in. Initial contributions will be 2%, with at least 1% from the employer and potentially 1% from the employee. (0.8% after tax relief).
Thereafter contributions will rise to 5%, with a minimum employer payment of 2% and a potential employee payment of 3% (2.4% after tax relief).
Finally, from October 2018 the minimum total contribution will equal 8% with a minimum employer contribution of 3% and a potential employee contribution of 5% (4% after tax relief).
These percentage contributions will be based on qualifying band earnings probably between £5,564 and £39,853 per annum.
Eligible workers are all employees aged between 22 and state pension age. Contributions will have to be against total salary within band earnings, which may fluctuate to reflect overtime and bonuses.
Individuals can opt out of the new regime by taking affirmative action, but will effectively lose the opportunity for compulsory employer and employee contributions if they do. They will automatically be opted back in every 3 years.
There are some very detailed requirements behind the summary above and if you have any queries or would like any advice on establishing a workplace pensions scheme, please do not hesitate to contact me.
John Davenport, Pensions Manager, Cassons.