WorkPlace Pension Reform

What It Is And What You Have To Do

The Pensions Act 2008 introduces new duties on employers that begin to be introduced in 2012. In brief, employers will need to ensure that they have in place a pension scheme for its employees, with minimum contribution levels, and enrol the employees into the scheme automatically.

Auto Enrolment

At the heart of the reform is the requirement for employers to automatically include certain employees into a pension scheme within a strict timescale, without the employee having to complete an application to joint or choose a contribution level. This is known as auto enrolment.

Who Will Need To Be Automatically Enrolled?

Jobholders aged between 22 and State Pension Age who earn at least £10,000 in 2016/17 terms. Other jobholders can ask to opt in.

What Minimum Contributions Are Required?

The total minimum contributions will be 8% of "qualifying earnings" - earnings between £5,824 and £43,000 for the 2016/17 tax year. This minimum is split as:

• 3% to be paid by the employer
• 4% to be paid by the jobholder
• 1% to be met through tax relief

Phasing In Of Contributions

The above minimum contributions will be phased in. The employer minimum contribution will be 1% to September 2017, 2% thereafter until September 2018, then 3% from October 2018. The minimum jobholder's contributions will be 0.8%, 2.4% and 4% over the same periods.

When Will This Happen?

• The largest companies need to offer the scheme from October 2012.
• Companies with 250-349 employees need to start by February 2014.
• Companies with 50-249 employees need to start between April 2014 and April 2015.
• Companies with 30-49 employees need to start August 2015
• Companies with fewer than 30 employees need to start between January 2016 and April 2017, the precise date being notified to the company.
  

Responsibilities Of The Employer

• Select a scheme for automatic enrolment
• Provide information to the scheme of eligible employees
• Provide information to employees when they become eligible - enrolment date, contributions, opt-out rights, opt-in rights, etc.
• Collect employee contributions
• Process opt-outs
• Maintain relevant records

Compliance With The Regulations

The Pensions Regulator has a range of powers to deal with employers who fail to meet their obligations, including the levy of large fines.

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