From 2012, 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.
Employees 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 £5,035 a year (increased with
earnings inflation from 2007).
The qualifying scheme may be a Personal
Account 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 employees 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 eligible
earnings (basic salary plus commissions,
bonuses and overtime between £5,035 and
£33,540 a year). This will apply immediately
to all new eligible employees and those not
currently in a qualifying scheme.
Employees between ages 16 and 21 or over
state pension age but under 75 can ask to be
enrolled, and you will have to pay in for
them. Low-earning employees 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 in
2012.
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.
The Government is proposing to introduce
auto-enrolment in stages between October
2012 and October 2015, starting with the
largest employers. It also plans to phase in
the level of compulsory contributions rising
from 1% initially to 2% in October 2015 and
3% a year later. But the requirements are
still something to be aware of. |
