Automatic enrolment is a Government initiative designed to ensure that more people save for their retirement through a pension scheme at work.

Currently, not all employers provide a pension scheme for their workers and where they do, not all employees choose to join the scheme.

In October, 2012 it became compulsory for the largest companies in the UK to enroll eligible employees into a pension scheme satisfying certain criteria, including compulsory employer and employee contributions.

By 2018 all employers will have to have put a pension scheme in place for their employees to join and where applicable, make contributions to it.  Therefore, over the next three years, this legislation will affect all UK employers.

What now?

Firstly, employers must identify their ‘staging date’ in order to start preparing for automatic enrolment.  With large numbers of small companies’ staging dates falling within the early part of 2016 there will be a huge demand for pension services and advice in this area.

There are large fines and penalties for non-compliance with the legislation and therefore, early preparation is extremely advisable.

At Springfield Financial Services Ltd, we are qualified and equipped to advise employers in relation to automatic enrolment.  We are independent and can access the whole of the market to select a workplace pension suitable for each individual firm’s requirements.

We are also able to run the pension schemes on an ongoing basis, leaving employers free to continue to manage their own businesses.

What employers need to know…

An employer’s staging date is based on the number of people employed and the company’s PAYE reference.  Details of all staging dates can be found on The Pensions Regulator’s website;

www.thepensionsregulator.gov.uk/employers/staging-date-timeline.aspx

Only ‘eligible jobholders’ must automatically be enrolled into a pension scheme.  ‘Non-eligible jobholders’ must be given information about their right to opt in to an auto-enrolment pension scheme but do not have to be automatically enrolled and ‘entitled workers’ must simply be given information about their right to join a pension scheme, no employer contribution is required in respect of an entitled worker.

The earnings criteria used to identify each type of worker are given below;

 

  Age 16-21 Age 22 – State Pension Age State Pension Age – 74
Earnings of £5,772 or less

Entitled Worker

Earnings over £5,772 up to £10,000

Non-Eligible Jobholder

Earnings above £10,000 Non-Eligible Jobholder Eligible Jobholder Non-Eligible Jobholder

 

Minimum contribution levels for employers and employees are being phased in as follows;

 

Compulsory contribution levels as a percentage of qualifying earnings

Date

Total contribution must be at least

Employer must contribute

Staging date up to 30th September, 2017

2%

1%

1st October, 2017 – 30th September, 2018

5%

2%

1st October, 2018 onwards

8%

3%

 

Qualifying earnings are band earnings between £5,772 and £41,865 per annum (2014/15).  They include salary, wages, overtime, bonuses, commissions, statutory sick pay, statutory maternity pay, ordinary or additional statutory paternity pay and statutory adoption pay.

It is not possible to opt out or delay the legislation.  However, employers can bring forward automatic enrolment to coincide with their accounting year or for any other reason.

Once enrolled, employees can opt out should they feel it is inappropriate for them to save into a pension.  However, this should not be encouraged and employers cannot be party to this decision in any way.

Any employee who chooses to opt out must do so of their own accord and must be automatically re-enrolled after 3 years.

For further information, or to arrange a meeting to start preparing for automatic enrolment, please contact us on 01772 729742.