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Auto-Enrolment

New! Auto Enrolment Planner for Employers

This planner will help employers understand what their duties will be when auto enrolment is introduced in October 2012.

Click here to use the Auto Enrolment Planner for Employers

The Basics

This new employer duty is planned to come into force from October 2012.  Under this duty, employers will have to:

Employers will also have an ongoing duty to maintain qualifying pension provision for workers who;

  • are already members of qualifying schemes; or
  • become members of such schemes.

Phased Implementation Of Auto-Enrolment

Although auto-enrolment comes in from October 2012, employers' own duties will be phased in over the following four years.  The phasing in will be based on the size of the employer, typically by PAYE size.

Click here for a schedule of those phasing in dates.  

Minimum Contributions For DC Schemes and the NEST 

Where an employee is opted into a defined contribution (DC) scheme or the National Employment Savings Trust (NEST), there will be a minimum contribution of 8% of qualifying earnings, of which the employer must pay a minimum of 3%.  If the employer chooses to pay the minimum 3%, the employee will pay 4%, with 1% paid as tax relief by the government.  (Qualifying earnings in 2006/07 terms are between £5,035 and £33,540).

However, these contribution rates will be phased in between October 2012 and October 2017. 

  • October 2012 to October 2016 - minimum of 2% of qualifying earnings with at least 1% from the employer.
  • October 2016 to October 2017 - minimum of 5% of qualifying earnings, with at least 2% from the employer.
  • From October 2017, minimum of 8% of qualifying earnings, with at least 3% from the employer.

Further details are expected in January 2012.

What Is Auto-Enrolment?

Auto-enrolment will mean workers being automatically enrolled into their employer's qualifying pension scheme without any active decision on their part. At present, many workers fail to take up valuable pension benefits because they do not make an application to join their employer's scheme. Auto-enrolment is meant to overcome this.

From October 2012 (subject to the phasing in of the new duty), all eligible workers will have to be auto-enrolled into a qualifying pension scheme.  Employers will choose the qualifying scheme they use, which could include the proposed new National Employment Savings Trust (NEST).  Each qualifying scheme must meet minimum standards in respect of the benefits it provides or the amount of contributions paid to it.  The scheme must also provide auto-enrolment for all eligible workers, and for all new workers when they become eligible.

Opting Out

Workers will be able to opt-out of their employer's scheme if they choose not to participate.  Workers who give notice during the formal opt-out period will be put back in the position they would have been in if they had not become members in the first place, which may include a refund of any contributions taken following automatic enrolment.

 

Click here for advice for EMPLOYEES

Click here for advice for EMPLOYERS

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