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:
- enrol workers into qualifying workplace pension
arrangements;
- choose the qualifying scheme(s) they adopt to discharge the
newly arising duty; and either
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
