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Auto Enrolment

7 April 2014

 

Joanna Ramsdale - Payroll Manager

joanna.ramsdale@haleysca.co.uk

You have probably heard lots about auto enrolment on the news but I just wanted to give you a brief summary of what auto enrolment is and how it will affect you.

What is auto enrolment?

People are living longer and we are being advised that too many people are under-saving or not saving at all for what could be a long retirement. Consequently the law on workplace pensions has changed to make it easier for millions more people to build up a pension, particularly those on lower incomes.

Auto enrolment means that, rather than having to actively choose to join a pension scheme, employees are put into one by their employer as a matter of course. If they don’t want to be in the pension scheme, they must actively choose to opt out. The purpose is to encourage people to stay in pension saving.

The law on workplace pensions has now changed and every employer must comply.

What does it mean for employers?

Auto enrolment duties come into force for you from your ‘staging date’. By your staging date you must have set up a pension scheme, enrolled all workers and be ready to process by this date. The Pensions Regulator will write to each employer 12 months and then again 3 months prior to the staging date.

Workers eligible to be auto enrolled:

  • are aged between 22 and State Pension age;
  • earn more than £9,440 a year (£10,000 in 2014/2015);
  • work in the UK

Employees who don’t meet the criteria above are able to opt into the pension scheme you’re using for auto enrolment; you must put them in if they ask.

You’ll have to pay a minimum employer contribution for all staff you put into this scheme. Please see the table below which indicates the contributions to be made, based on basic pay:-

Payment phasing period

Employer

Total (gross)

Up to Sep 2017

2%

3%

Oct 2017 to Sep 2018

3%

6%

Oct 2018 onwards

4%

9%

What changes need to be made?

You’ll need to make some changes to allow for auto enrolment:

  • set up a pension scheme or modifying an existing one
  • make any necessary changes to payroll to handle the new requirements
  • put systems in place to monitor the ages and earnings of your staff
  • communicate with your employees to inform them of automatic enrolment and how it will affect them
  • budget for higher payroll costs; for the employer contribution payable to each eligible employee

Auto enrolment represents a significant change for employers. Those best prepared are already adjusting and planning in order to be ready for auto enrolment by the staging date.

If you have any queries or would like help with auto enrolment, please do not hesitate to contact Joanna by calling the office or emailing joanna.ramsdale@haleysca.co.uk

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