Every employer in the UK is now required by law to enrol all of their employees into a workplace pension. A workplace pension is a way of saving for retirement arranged by an individual’s employer. Larger employers started doing this in October 2012 and over the next few years everyone else will have to follow, so that by 2017/18 all employers have a workplace pension in place. So all employers should ensure they understand now when their deadline ‘staging date’ is for having a scheme in place. Find yours at:
Who will be automatically enrolled into a workplace pension?
Employers will automatically enrol Eligible job holders into a workplace pension who:
- are not already in a qualifying pension scheme
- are aged 22 or over
- are under State Pension age
- earn more than £10,000 a year (this figure is reviewed every year) and work in the UK
Opt – Out Notices
An eligible job holder who has been automatically enrolled has the right to opt out of the employer’s pension scheme, if they decide to do this they must complete an ‘opt out’ notice which they obtain directly from the pension scheme and pass to the employer. They also have the right to opt back in again at a later date but not within the same 12 month period.
Non eligible job holders (aged 16 to 21 or aged between state pension age and 74 with earnings over £10,000) OR (aged between 16 and 74 with earnings of £5,772 to £10,000) also have the right to join the workplace pension scheme and the Employer must provide them with information on how to ‘opt in’. If they choose to opt in they must give the employer an ‘opting in notice’ and the employer must contribute to the scheme.
Entitled worker (aged 16 to 74 with earnings of £5,772 a year or less) also have the right to join the pension scheme and the Employer must provide them with the information on how to do this and they must give the employer a ‘joining notice’, however there is no requirement on the employer to make contributions in respect of these workers.
Employers must make contributions
The minimum contribution by law that must be paid into the pension scheme is 8% with the Employer contributing at least 3%. However, to help employers with their contributions the rates will be introduced gradually, known as ‘phasing’. From October 2012 the minimum contribution will be a total of 2% with at least 1% being the employer’s contribution.
Employer minimum Total minimum
Staging date to 30/09/2017 1% 2%
01/10/2017 – 30/09/2018 2% 5%
From 01/10/2018 onwards 3% 8%
Contributions are payable on earnings between the lower and higher thresholds, £5,772 to £41,865 for 2014/15.
Employers must choose their own pension scheme and within 4 months of their staging date register with The Pension Regulator and provide details of how many employees have been automatically enrolled or penalties will be issued for non-compliance.
This is just an outline on what your responsibilities will be and as you can see it is not straightforward. We advise acting now to make sure you can meet these requirements.