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Pensions auto-enrolment: What does it mean for employers?

Many employers will have seen the recent media coverage about implementation of pension changes and the requirement for employers to automatically enrol employees within a pension scheme. However, at present, not all employers are subject to this requirement and many are asking what it means for them.

The government’s intention is that eventually all UK employers will be required to auto-enrol eligible job holders into a pension scheme.

However, the provisions are being formally implemented over a five-and-a-half year period, which began on 1 October 2012. At present, only larger employers are affected but the provisions will eventually apply to smaller employers and new businesses.

Occupational pension scheme

Once an employer becomes subject to the new duty it must automatically enrol its employees, unless the employee is already an active member of a qualifying pension scheme. Employers are able to use existing occupational and personal pension schemes for this auto-enrolment purpose, provided they satisfy certain criteria.

Auto-enrolment staging dates

Employers with between 50 and 249 workers have been given dates between 1st April 2014 and 1st April 2015 to comply. Employers with fewer than 50 employees have been given dates between 1st June 2015 and 1st April 2017 in which to comply. New businesses have been given dates at the end of the timetable. To check when your own date for compliance is, go to www.thepensionsregulator.gov.uk and look at the Staging Date Timeline.

An employee must be aged between 22 and state pension age to be eligible for enrolment. They must also be earning at or above the income tax earning threshold (£8,105 in the 2012/2013 tax year). Employers must pay 3% of earnings into the scheme, with employees contributing 5%. Employees can choose to opt out of the scheme but will be automatically re-enrolled every three years.

If you would like more information about the issues raised in this article or by employment law matters in general, please contact employment_team@lyonsdavidson.co.uk

Posted on Nov 5th, 2012 by Lyons Davidson