Automatic enrolment (or auto-enrolment) is a government initiative designed to help more people save for retirement. By 2018, all employers will be legally required to enrol eligible workers into a qualifying workplace pension scheme, although workers can opt out.
Lawrence Shafier explains the Auto Enrolment legislation and the steps your business needs to take to comply and provides a better understanding of accounts filing dates
As an employer, auto-enrolment means that you will need to enrol workers:
- not already in a suitable workplace pension scheme
- working with qualifying earnings who wish to join the scheme
- aged between 22 and state pension age
- who work in the UK
- for whom they deduct income tax and national insurance from wages
- who earn more than £10,000 gross (in the 2014-15 tax year – the figure will be reviewed annually).
The date when employers need to start auto-enrolment is called the staging date and is based on the size of their PAYE scheme on 1 April 2012. Employers with 50 or fewer workers will start to come on board from April 2015.
As an employer, a key issue for you will be planning for the costs involved in auto-enrolment, including the contributions you must make to pensions – a minimum percentage, based on a band of earnings (between £5,772 and £41,865 in the 2014-15 tax year, including overtime and bonuses).
Until 30 September 2017, your minimum employer contribution will be one per cent, rising to two per cent between 1 October 2017-30 September 2018 and three per cent from 1 October 2018. Alternatively you can choose to contribute more.
Employees will also contribute, with the total (employee and employer) minimum contribution set at eight per cent from 1 October 2018.
If you do not have an existing pension scheme, you can use NEST (the National Employment Savings Trust), which is open to any employer, or work with a pensions adviser to set up a new scheme.
If you already have a scheme, you will need to seek specialist advice, for example, from a pensions adviser, to ensure that it meets auto-enrolment criteria and to implement any changes necessary to bring it into line.
Alongside these responsibilities, other issues you will need to address include dividing your workers into three different categories, based on age and earnings, each of which have different rights, entitlements and employer communication obligations.
The best way to get auto-enrolment right is to start planning as early as possible by taking expert advice. At Haslers, we can assist you with a wide range of auto-enrolment responsibilities, including assessing existing pension schemes for eligibility and setting up new schemes.
For more information on our East London and Essex pensions auto-enrolment services, please contact our preferred financial services partner Steve Martin of Atlantic Wealth Management on 01245 409 994 or at firstname.lastname@example.org.