The world of pensions is undergoing a major change with the gradual introduction of auto enrolment. Billed as the best way to encourage workers to save for their retirement, it is being introduced in stages from 2012 to 2018. Here’s what you need to know.
1. It affects ALL employers
One of the misconceptions around auto enrolment is that it only applies to larger employers. It actually affects ALL employers. The smaller employers (under 50 employees) have later staging dates, but every business with a payroll needs to understand what the impact is for them.
2. Pensions under auto enrolment don’t have to be with NEST
NEST is an independently run pension scheme backed by the Government which was created specifically for auto enrolment. It is however not the only option. There are increasing numbers of qualifying schemes available from the majority of the main pension providers, so it is worth getting independent financial advice to determine which scheme works for your business.
3. Auto enrolment applies even if you already have a pension scheme
Even if your business already has a pension scheme, you will still be impacted by auto enrolment:
- Does the existing pension scheme meet the qualifying criteria?
- If it does qualify you can carry on using it for existing scheme members, but you will still need to write to them about auto enrolment;
- If it doesn’t qualify then you will need to choose another scheme that does;
- The workforce still needs to be assessed
4. Who makes the contributions to the pension scheme?
Under auto enrolment both employers and employees contribute to the pension scheme. The statutory contribution levels will gradually increase over time, and contributions are based on “qualifying earnings”. By October 2018 the employer minimum contribution will be 3%, and the total minimum contribution will be 8%.
5. The responsibility for complying rests with the employer
There is a lot of information out there to help you work through auto enrolment, but it is up to the employer to comply with their legal responsibilities. If you don’t know how auto enrolment is going to affect your business then you need to start planning for it soon. Why not take a look today to identify your staging date.