Automatic Enrolment and Work Place Pension Reform – The Facts
Millions of people in the UK are currently not saving enough to have the income they need in retirement. At the same time life expectancy is increasing which in turn places great strain on the State pension system. To alleviate this burden, the Government has reformed workplace pensions and made it law that every employer will have to automatically enrol eligible workers into a qualifying pension scheme, and make regular contributions.
It is hoped that automatic enrolment will help to address the common issues that prevent people from saving for their retirement such as:
- believing pensions saving is complicated and confusing
- people simply not getting around to it
- a lack of suitable pension products being available for people on low to moderate incomes
- lack of employer pension provision, particularly in smaller firms
Auto-Enrolment – The Basics
On a series of dates that started from October 2012 EVERY employer will be REQUIRED BY LAW to:
- Enrol all their eligible employees not already in a pension scheme, into a Qualifying Workplace Pension Scheme, (QWPS), within 1 month of becoming eligible.
- The employer is also required to pay contributions for every employee who does not opt out of the QWPS.
The actual date that each employer will need to comply with the legislation will depend upon their staging date. These dates vary from October 2012 through to the beginning of 2017.
The pension scheme must be a Qualifying Scheme, meaning it must meet certain Government standards. To be qualifying, either minimum contributions must be made into the scheme or it must provide a minimum rate at which benefits build up. Regardless of the scheme chosen, the employer must give their workers factual information including confirmation they have been enrolled into a pension scheme, what the pension scheme is and how much they will have to pay.
It is the first time that employers have been required by law to contribute to their workers’ pension provision.
Eligibility – The Rules
An eligible employee is a worker who:
- is at least 22 years old
- is not already in a workplace pension scheme
- has not yet reached State Pension age
- earns more than £10,000 – under current legislation
- works or ordinarily works in the UK
Employers – What to do and how to proceed
MHA Carpenter Box Wealth Management is able to provide a complete service which will help ensure your company is compliant at your staging date and on an ongoing basis.
This service includes:
- An initial evaluation of your workforce identifying eligible employees
- Confirming the date you will need to comply with legislation
- Designing a suitable pension solution that meets legislative requirements
- Communicating with changes with your staff
- Implementing changes
- Ongoing monitoring of the scheme to ensure compliance is maintained
The benefits of planning and planning early…
- The employee’s perception of the type of scheme offered and the attitude of the employer towards providing a pension scheme may provide an edge with the recruitment and retention of quality staff.
- Pension contributions made by the employer to a pension scheme are classed as a business expense, potentially reducing tax. Additionally, making pension contributions, rather than increasing employee’s salary will save national insurance.
- Early engagement, planning and ultimately implementation will allow easier administration for an employer reducing the associated costs and spreading the burden over a period of time.
For more information on any of these services please contact Roy Thompson at MHA Carpenter Box Wealth Management on 01903 534587