The date by which your company needs to have pension auto enrolment in place for its employees will depend on the number of people on the payroll. The initiative started in October 2012 for companies employing over 120,000 employees and is due to finish in February 2018. The scheme has been set up to make employers provide a scheme which then requires positive action by an employee to opt out, to try and introduce a culture of saving.
A recent study stated that 27% of medium sized companies were now drawing up plans to implement the scheme as those with between 160 -250 staff will be required to have the scheme in place by April 2014.
The Pensions Regulator's survey found that attitudes were generally supportive of the policy with 80% of medium sized employers believing automatic enrolment was a good idea for workers. I think a lot of people would agree with this. After all there are 70 million people in the UK with around 20% who are not saving for a pension. We are therefore heading for a crisis if definitive action is not taken by the government who, one way or the other, will end up footing the bill.
So who is eligible?
There are two main categories of worker for which the employer duties apply:
1. Jobholders
a) Eligible jobholders: Aged between 22 and state pension age and working, or ordinarily working, in the UK. They must have qualifying earnings payable by the employer, in the relevant pay reference period, that are above the earnings trigger for automatic enrolment (currently £9,440 pro rata over the relevant pay reference period which is usually the payment period). If these criteria are met then the employer must automatically enrol them into a pension scheme and pay minimum contributions to the scheme.
b) Non-eligible jobholders: These are workers who are not eligible for automatic enrolment but can choose to opt in to a pension scheme and benefit from an employer contribution. They will be aged between 16 – 75 years old, work or ordinarily work in the UK and have qualifying earnings payable by the employer in the relevant pay reference period that are above the lower earnings level for qualifying earnings (currently £5,668 pro rata over the relevant pay reference period).
2. Entitled workers
These are called entitled workers because they are ‘entitled’ to join a pension scheme but the employer does not have to make any contribution. They are aged between 16 and 74, are working or ordinarily working in the UK and do not have qualifying earnings (i.e. less than £5,668 pro rata over the relevant pay reference period).
Whichever category your workers fall into, you need to make sure you do not fall foul of the provisions as failure to comply could result in you receiving a hefty fine.
Katie Stephenson is a Solicitor in the Employment Department at BHW Solicitors in Leicester. Katie can be contacted on 0116 281 6227.
For more information about pension auto enrolment, see the Pensions Regulator's website.