What you need to know about auto-enrolment
Every employee eligible to benefit from a pension scheme will be automatically enrolled into one by October 2018. This means if you are an employer, you will obliged to contribute to a workplace pension scheme to ensure your staff members receive retirement benefits.
While the employee is automatically enrolled, the business is not. That is why it is important to know everything you need to start contributing before the deadline.
What is auto-enrolment?
In the past, companies could choose whether to have a workplace pension scheme or not. However, The Pensions Act 2008 stipulates UK employers have to give their staff access to a company pension scheme that meets certain criteria, automatically enroll some employees and allow others to join in if they want, and pay contributions to their retirement funds.
It is a legal duty to do this, and businesses that fail to will be fined.
When is the deadline?
The final deadline (known as the staging date) to have a workplace pension scheme is different for many employers, depending on how many staff members they have. Those with more than 250 employees had to have a company pension scheme in place by February 2014, while businesses with fewer than 30 workers have a deadline of April 2017.
You should have received a letter from The Pensions Regulator telling you your specific deadline, but you can also find this out online here.
It is wise to give your firm 12 months to prepare before the staging date to ensure everything is in place in time.
Who is automatically enrolled?
Not all your staff members will be automatically enrolled in the pension scheme, so it is important to find out who is. Those working in the UK aged 22 up to State Pension Age with a salary of £10,000 a year or more in 2015/16 will be eligible for the scheme, while anyone aged between 16 and 75 can join it if they want to.
According to NEST, 11 million eligible workers are going to be enrolled into workplace pension schemes by 2018 by 1.2 million employers, so it is imperative you know who you need to register.
You will have to contribute to everyone’s pension pots if they request to join, except those who are 16 and above and earn less than £5,824.
How much do you contribute?
Businesses have to contribute a minimum of 1% of your employee’s qualifying earnings. This percentage is set to increase over the next few years, so it is important you keep an eye on the figure to ensure you are contributing enough into your staff’s pension schemes. From October 2018, you will have to pay 3% of their earnings.
To learn more about auto-enrolment, visit The Pension Regulator, where you will get advice on how to manage a scheme, find out your staging date and much more besides.