
Depending on the
number of workers* in your business,
between 2012 and 2016, you will
have to automatically enrol all eligible
employees in a qualifying pension scheme and
boost each employee’s contributions with
contributions of your own.
Workers eligible for automatic enrolment
will be:
- Those who aren’t already in a
qualifying pension scheme.
- Aged between 22 years and State
Pension retirement age and earning over
the standard Personal Allowance for
Income Tax (£7,475 in tax year
2011/2012).
- Working in Great Britain.
The qualifying scheme may be a NEST or your own Company Scheme, if it
meets certain criteria.
The important point here is that the
Government has set a minimum contribution
for these qualifying schemes:
Minimum Contribution: 8%
Employee Pays: 4%
Tax Relief: 1%
You Pay:
3%
While eligible workers can opt out, for those
choosing to contribute their 4% and allowing
for 1% tax relief, this will mean you will
have to contribute 3% of their 'qualifying'
earnings (basic salary plus commissions,
bonuses and overtime between £5,715 and
£38,185 a year). This will apply immediately
to all new eligible workers and those not
currently in a qualifying scheme.
Workers between ages 16 and 21 or over
state pension age but under 75 won't be
automatically enrolled but can ask to be
enrolled, and you will have to pay in for
them. Low-earning workers can also ask you
to arrange a pension for them, but in that
case you won’t have to pay in.
What this
means for you?
Research has shown that auto-enrolment is
one of the most effective ways of triggering
pension scheme membership and contribution.
So, it is highly likely that your business
will incur significant additional costs
through auto-enrolment.
The increase will be higher for those who
don’t currently offer a Company Scheme or
who don’t currently contribute to it for
their employees and/or eligible workers.
The Government is proposing to introduce
auto-enrolment in stages between October
2012 and October 2016, starting with the
largest employers. It also plans to phase in
the level of compulsory contributions rising
from 1% initially to 3% by October 2017
(full implementation).
* A 'worker' is a wider category than
just employees and can include some
contractors or agency workers. As a general
rule, if you have to pay the national
minimum wage to someone or they are working
under an apprenticeship, they are a worker. |