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Pensions Auto Enrolment

15 October 2013

Yes … it’s coming your way!  A new scheme from the Government to encourage your staff  to start saving for pensions … but  you, the employer , will be footing some of the bill too so you need to be planning ahead  for this additional expense particularly when it comes down to negotiations on wage rises and preparing any future cash flow projections.

So how does this scheme differ from the stakeholders scheme which the Government tried a few years ago?  Well… . in summary, the main differences in very simple terms are:

  1. All employers with at least one employee will be affected (previously it was over five)
  2. The employer needs to automatically enrol an employee into the scheme without their consent  (previously the employee could just let you know he was not interested)
  3. Employees then have to individually opt out of the scheme (the employer cannot do this for an employee)

So, in a nutshell, the Government is relying on the fact that employees will forget to enrol out of the scheme – to date, most large employers have already had to bring in the new scheme and the stats are showing that the majority of employees have done exactly that - not opted out of the scheme. It’s therefore looking likely that this scheme is going to be a success in achieving the Government’s aim of encouraging people to save for their future retirement. Good news for them but not so good for employers!

When are employers going to have to deal with this?  Well you need to start auto enrolling all your employees during a period set by law who are not of pensionable age, not in an existing qualifying pension scheme,  who are over 22 years old and earning over £9440 per year - as follows:

No of Employees              Automatic Enrolment Period 
                                         From                        To
50 – 249                            1 April 2014                1 April 2015
30 – 49                              1 August 2015            1 October 2015
< 30                                  1 January 2016           1 April 2017

Please note that there are also rules regarding when auto-enrolment starts for new employers and those without PAYE schemes .  Look at website for full table.

As you can see from the above , there is not a lot of time to go … and we all know how quickly time passes!!  So what will you as an employer have to do to get prepared?

Well firstly, if you already have a staff pension scheme then you will need to check it qualifies and that all eligible job holders are in it – that’s a relatively easy task.  However, if you do not have a scheme then you need to get one set up and ensure all employees are enrolled in it from the dates above – needless to say there are some costs involved with this too!  Secondly you will need to advise your staff on the rules and make sure you are also fully briefed on the rules as there is a lot of additional administration involved for you – more red tape and costs!  Thirdly you need to be prepared for the costs which will hit your cash flow – the Government are introducing a staged introduction  – essentially the cost to you will be 1% of gross salary for each employee in Year 1,  increasing by 1% each year to 3% by Year 3.  So the maximum cost of the employer contribution to the pension scheme will eventually be 3%.

Food for thought!

For more information, contact Carol Wright at

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