So what is it? In October 2012 the first companies were compelled by law to give workers access to pension provision, with both employees and employers making payments into a pension. Over the next four years, up to April 2017, employers are compelled to enrol their employees in an appropriate pension scheme or face fines or worse. The pension scheme that employees join must meet specific conditions to be an ‘automatic enrolment scheme’.
Why is this necessary? It’s a fact, the average life expectancy of men and women is increasing, with the likelihood we will all be retired for at least 20 years. According to the government we are simply not saving enough, and to overcome this inertia, the workplace pension has been created. Whilst the opening contribution levels are low (only 2% of salary) - come October 2018 the minimum contribution will be 8% of salary, 3% of which will need to come from the employer, with 4% from the employee and 1% in tax relief. Over time it is quite conceivable that these minimums will increase in order that this initiative makes a real difference.
Employers need to understand now what their responsibilities are, when they need to set their scheme up by and how to implement and select an appropriate scheme. The are many variable factors including who is eligible, when and how much needs to be paid in. There is then the practical aspect of integrating any scheme into payroll and meet payments on time. Finally, for this in existing schemes an analysis needs to be carried out to ensure it meets the new criteria.
Being prepared and forward planning will be to key to ensuring that auto enrolment doesn’t have a significant effect on your business. Please feel free to get in touch to begin these discussions and see how we can help you make the transition smoothly and easily.
Further generic information can be found at www.thepensionsregulator.gov.uk.