The Government is changing pension legislation and introducing the new Auto Enrolment Scheme. Here is our simple Q&A to explain a bit more about Auto Enrolment and how you can expect it to impact upon your business. 

What is Auto Enrolment?
Currently, many workers don’t take advantage of their employer’s pension scheme because they haven’t completed the relevant application form. To overcome this, workers will automatically be entered into their employer’s qualifying scheme.

Who will be automatically involved?

  • Those not already in the employer’s pension scheme

  • Anyone over the age of 22 years and less than State Pension age

  • Employees that work in the UK

  • Employees that earn between £5,876 and £45,000 a year before tax (this may change due to different pension schemes)

What are the minimum contribution amounts?
The Company and employees must pay in the following contributions:

2% of qualifying earnings with at least 1% coming from the employer

April 2018 to March 2019
5% of qualifying earnings with at least 2% coming from the employer

From April 2019 onwards
8% of qualifying earnings with at least 3% coming from the employer

Can employees under age 22 years or over the State Pension age join?
Although these employees will not automatically be enrolled, if they are below the age of 75 years and earn over £5,876 they can choose to join the Workplace Pension Scheme. If they earn less than this amount, then the employer needs to allow the employee access to be able to save, but does not have to contribute.

When will Auto Enrolment come in?
Every business that employs anyone should now be advised of their Auto-Enrolment STAGING DATE. All companies that have employees will need to have them auto-enrolled them by the end of 2018 regardless of how many employees you employ. Please reference the GOV.UK website for further details for your Company.

Will the Government be making a contribution?
The Government will make a contribution in the form of income tax relief from money paid into the pension scheme.

Will employees have the option to op-out?
Employees will be given the option to give notice during the formal op-out period. These people will be put back in their original position before joining the workplace pension.  This may mean being refunded for any contributions that had been paid into a pension.

If you would like more information on Auto Enrolment, including our simple-to-follow flowchart and all the documentation you need, click here.