Auto enrolment - a quick guide


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Auto-enrolment for employee pensions is on the horizon. Make sure you are planning for its implementation

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Auto enrolment - a quick guide

  1. 1. From October 2012 the government is making sure that employees take a greater responsibility in their pension arrangements by requiring employers to automatically enrol into pension schemes and to make a minimum level of contributions. This will be phased in, larger employers first The content of this newsletter is intended for general information purposes only. You should always seek appropriate professional advice before acting. No responsibility is taken for any loss as a result of any action taken or refrained from in consequence of the contents of this newsletter. Our view Pensions Auto-Enrolment How much will it cost me as an employer? Employer (by PAYE scheme size) Staging Date More than 2,000 employees Before August 2013 1,250 to 1,999 1 September 2013 800-1,249 1 October 2013 500-799 1 November 2013 350-499 1 January 2014 250-349 1 February 2014 160-249 1 April 2014 90-159 1 May 2014 62-89 1 July 2014 50-62 Between 1 August 2014 & April 2015 Below 50 Between 1 June 2015 & 1 April 2017 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. Employers are also able to stipulate up to three months period before employees can join the scheme, so temporary and seasonal staff may not need to be included An eligible worker is an employee aged between 22 and state pension age and earning above the income tax personal allowance (£9,440 in 2012/13). Contributions will be payable on earnings between £5,668 and £41,450. Does everyone need to join? From To Employer Total October 2012 September 2016 1% 2% October 2016 September 2017 2% 5% October 2017 - 3% 8% Employers should prepare themselves for these changes. Consider which type of pension fund to make available, stakeholder, occupations scheme, personal scheme or government created NEST scheme. They should decide upon pensions policies and consider whether introducing salary sacrifice arrangements for employee contributions to provide National Insurance savings. Where a worker is automatically enrolled 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 worker will pay 4%, with a further 1% paid as tax relief by the government. (Qualifying earnings is earnings between £5,668 and £41,450).