Pensions auto-enrolment is an initiative of the UK Government that seeks to ensure that people provide for their own retirement along with their employer.
Employees and employers are both obliged to contribute to the employees' pension. The initial responsibility falls on the employer who is legally obliged to arrange a qualifying ‘Workplace Pension’ scheme for their employees.
Who is affected?
Most employees will be classed as eligible jobholders and therefore must be enrolled in their employer's pension scheme.
To be an eligible jobholder, the worker must:
- Be at least 22 years of age and below the state pension age
- Earn at least £10,000 a year or the equivalent in any pay period.
Most other employees are able to join the scheme if they choose to. In some of those cases, the employer is required to contribute if the employee does.
How much is involved?
From the start of auto-enrolment in 2015, employees and employers must each contribute at least 1% once their scheme is set up.
The amount of the contribution will increase over time. From April 2018, employees will contribute 3% and their employers will contribute at least 2%, increasing to 5% and 3% respectively in April 2019.
What do employers need to do?
Employers must make arrangements to enrol their employees in an appropriate pension scheme. There are a few basic steps involved:
- Assess the employees - apply the rules above to determine who is eligible
- Communicate with employees - write to your employees (email is fine) letting them know what is happening, why it is happening and what options they have
- Set up arrangements with a suitable pension provider and begin making contributions
- Submit a declaration of compliance to The Pensions Regulator
When do employers need to do this?
Every employer in the UK has been assigned a 'staging date'. These were staggered to give employers and the pension industry time to get ready. The biggest employers went first, starting in 2015. Most smaller employers have staging dates late in 2016 or during 2017.
How do I find out my staging date?
That's easy - just enter your PAYE reference number at The Pensions Regulator website.
Where can I find out more?
Visit the employer pages of The Pension Regulator website