Automatic Enrolment into a Workplace Pension
Starting from October 2012, up to 11 million workers will be automatically enrolled into a workplace pension. Larger employerswill go first, with small and medium sized employers following over the next six years. A workplace pension is a way of saving for retirement arranged by an individual’s employer. It is sometimes called a ‘company pension’, an ‘occupational pension’ or a ‘works pension’.
Who will be enrolled into a workplace pension?
Employers will automatically enrol workers into a workplace pension who:
• are not already in a qualifying pension scheme
• are aged 22 or over
• are under State Pension age
• earn more than £8,105 a year (this figure is reviewed every year), and work or usually work in the UK.
Automatic enrolment into a workplace pension is a hassle free way for workers to save for their retirement whilst they earn.
Why is this happening?
Millions of people are not saving enough to have the income they are likely to want in retirement. Life expectancy in the UK is increasing and at the same time people are saving less into pensions. In 1901 there were 10 people working for every pensioner in the UK. In 2010 there were 3 peopleworking for every pensioner. By 2050 it is expected that this will change to just 2 workers.
What help is available for employers?
For the first time employers are required by law to automatically enrol all eligible workers into a workplace pension and make a contribution to it. The Pensions Regulator are responsible for ensuring employers comply with the new law and have produced guidance to help employers to do this. They will write to each employer before the date they are required to start enrolling workers into a workplace pension, and depending on employer size, on at least one other occasion. As well as using social media and trade press advertising to raise awareness of employers’ duties they have produced detailed guides and interactive tools on their website to take employers through the process step by step.
One of the employer duties relating to automatic enrolment is that employers are required by law to provide the right information in writing, to the right individual at the right time, so that people know how automatic enrolment will affect them. To help employers to do this, there are tools on The Pensions Regulator
website. These include several letter templates depending on workers’ circumstances and information on key topics workers are likely to ask about.
When do employers have to start enrolling their workers?
The date workers are enrolled depends on the size of the company they work for and is being rolled out over the next six years (this is called a staging date).
• Large employers (with 250 or more workers), will have to start automatically enrolling their workers from October 2012 to February 2014 (some employers may choose to start earlier)
• Medium employers (50 – 249 workers) will have to start automatically enrolling their workers from April 2014 to April 2015
• Small employers (49 workers or less) will have to start automatically enrolling their workers from June 2015 to April 2017
• New employers (established after April 2012) will have to start automatically enrolling their workers from May 2017 to February 2018
• Employers who chose to use Defined Benefit or Hybrid Schemes can delay their staging date until 30 September 2017
Once The Pensions Regulator has notified employers of their date to enrol eligible workers into a workplace pension, employers can choose to postpone automatic enrolment for up to three months from that date. If they choose to postpone, employers must inform those workers in writing. Employers can also use the ‘postponement period’ for any newly eligible workers.