27 October 2010
The Government today announced the outcome of the 'Making
Automatic Enrolment Work Review' and which recommendations it will
adopt from the review.
Automatic enrolment into workplace pension schemes will be
staged according to the size of the employer, between October 2012
and September 2016. The largest employers will have to comply first
from October 2012. . The purpose of the review was to ensure that
there is a balance between costs and benefits for individuals and
that automatic enrolment will not create a disproportionate burden
on employers.
The main points of the Government's announcement today are as
follows:
- The earnings threshold at which an individual is automatically
enrolled into a pension will be aligned with the income tax
personal allowance (£7,475 in 2011/12).
- The threshold at which contributions become payable will be
aligned with the National Insurance primary threshold (£5,715
in 2010/11).
- All individuals earning more than the National Insurance
primary threshold will be able to opt-in to their employer's
designated scheme and receive an employer contribution if they want
to do so.
- There is no change in the age limits between which automatic
enrolment will apply (22 and pensionable age).
- Individuals must be automatically enrolled before they can opt
out; they cannot choose in advance of being automatically enrolled
not to join.
- Very small employers will not be excluded from the
requirements.
- The National Employment Savings Trust (NEST) will be retained
and measures will be taken to ensure small employers have easy
access to it.
- There will be an optional three month waiting period before an
employee needs to be automatically enrolled into a pension scheme.
During this period, individuals can choose to opt in to start
saving straight away.
- The largest employers who are due to be brought into the
reforms between 1 October 2012 and 1 November 2012 will be allowed
to start auto-enrolment from as early as July 2012.
- Employers will be given the flexibility to re-enrol employees
three months either side of their automatic re-enrolment date.
- The facility for certain employers to postpone automatic
enrolment will be removed.
- The process for employers to certify that their money purchase
scheme meets the relevant quality requirements will be simplified
into a simple three step process.
Next steps
The Government will work with employer representatives over the
next few months to determine what measures can be put in place to
ensure employers are not held liable for their scheme choice if
they choose NEST or a stakeholder pension scheme as the scheme they
use to auto-enrol their employees.
The Government will also work with the Recruitment and
Employment Confederation to ensure a smooth transition for
employment agencies.
There will not be any legislation at present to remove the cap
on contributions into NEST, intended to stay in place until at
least 2017. The Government will wait to see how the reforms roll
out before deciding whether to allow increased contributions. The
Government will also consider the general issue of how pension
transfers can be simplified to make it easier for people to
transfer between pension schemes; there do not appear to be any
proposals at present to remove the restriction on transfers into or
out of NEST.
