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Food For Thought ............................

24 September 2012

From the start of October 2012, there are new pension rules being introduced that impact on all employers with more than one worker. 


Although the changes are being phased in, it’s important to take action now to ensure you’re prepared – are you ready?


What’s happening? 

Work based pensions are being reformed to encourage more people to save for their retirement, as many people are not saving at all, or if they are saving, they are not saving enough for a comfortable income. 

The new rules could impose a heavy burden for employers, some of whom may need to recruit additional staff or seek external assistance to cope with the administrative burden.


What do the new rules mean?

From 1 October 2012 (subject to the phased introduction shown in more detail below), employers with more than one worker will have a duty to automatically enrol all eligible workers into an approved workplace pension scheme or into the National Employment Savings Trust (NEST).  Contributions will need to meet a minimum criteria and be at least partly funded by the employer.  To be able to automatically enrol workers into a pension scheme, a qualifying scheme must meet minimum requirements so any existing schemes in place will need to be checked to see if they meet this criteria.


Who does it apply to?

Employers will have to automatically enrol workers who are between the age of 22 and under the state pension age, earning above the income tax personal allowance (£8,105 in 2012/13), who are working or ordinarily working in Great Britain and not currently in a qualifying pension scheme.

A ‘worker’ is defined as any individual who works under a contract of employment (an employee), or has a contract to perform work or services personally (ie they cannot send a substitute or sub contract the work) and is not undertaking the work as part of their own business.  This may include agency workers if they have a contract with either the agent or the principal (the third party to whom the individual is being supplied by the agent).


What will employers have to do and what must they not do?

There are lots of new duties that will need to be incorporated into a business, some of which are shown below:

  • constantly assess and categorise the workforce into three categories – ‘eligible jobholder’, ‘non eligible jobholders’ or ‘entitled workers’ – to see what their duties are in relation to each category and action these duties
  • provide a qualifying pension scheme or NEST for workers, provide the right information to each worker in each category at the right time, then process the contributions for workers being automatically enrolled, those choosing to opt into the scheme and promptly process refunds for opt out notices received for those opting out within the one month opt out window
  • register with The Pension Regulator and give them details of the qualifying scheme and the number of people that have been automatically enrolled or opted out on an ongoing basis, keeping these records (which can be requested at any time) for a minimum of six years
  • automatically re-enrol and notify those ‘eligible jobholders’ who opted out of the scheme and did not join another scheme, every three years

Employers must not induce workers to opt out or cease their membership of the qualifying pension scheme, or indicate during the recruitment process that a worker’s decision to opt out of automatic enrolment will affect the outcome (this applies immediately whether or not the staging date has been reached).


Are there any penalties for non-compliance?

The Pension Regulator (TPR) will monitor compliance with the new process and will be able to issue financial penalties (e.g. £2,500 per day of non-compliance for companies with between 50 and 249 employees), as well as commence civil action and criminal prosecution.


When do the new duties begin?

The new duties start from 1 October 2012 and staging dates will depend on an employer’s size and PAYE reference number. 


  • Employers with 250 or more workers will be affected from October 2012 to February 2014
  • Employers with between 50 and 249 workers will be affected from April 2014 to April 2015
  • Employers with fewer than 50 workers will be affected from June 2015 to  April 2017
  • New employers’ duties will begin from May 2017 to February 2018. 

Some of these dates may seem distant, but we would recommend that planning for the new rules is undertaken sooner rather than later.

If you have a Pensions Adviser we would recommend that you contact them in this regard. If you don’t have an Adviser, we can refer you to someone who can offer the assistance and advice you require.

Take a look at our more detailed summary by clicking here, and if you’d like assistance in sourcing advice in relation to the new rules, please call your usual SPRiNGFORDS contact.

This is a general guide that is intended to give background information and is not a substitute for taking specific advice based on your particular circumstances.  Your Tax Adviser at Springfords will be happy to take a closer look with you, however Springfords is unable to offer pension or investment advice.  

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