Due to a recent change in legislation, all businesses across the UK big and small or required to auto-enrol their employees onto a pension scheme.
This is expected to fully be in place by 2017, and it’s always best to head online and check your company’s staging date if you’re unsure when it’s your turn and want to avoid a fine.
If you’re looking for more information on auto enrolment and what it will mean for your company, then you’ve come to the right place.
We’re going to reveal an overview of the process so that you can get yourself fully up to date with what’s going on.
What is Auto Enrolment?
Auto Enrolment is a piece of legislation brought in by the government that means all companies need to provide a pension for each of their employees. Every company across the UK has been provided with a staging date, which allows time to prepare for auto enrolment and offers the chance to make sure everything is in place.
If you miss your staging date and don’t get the right legislation in place in time, then you could find yourself subjected to a fine. So make sure you take note of your staging date (http://www.thepensionsregulator.gov.uk/employers/staging-date.aspx) to avoid this from happening.
The name ‘auto enrolment’ comes from the fact that employees need not do anything to ensure they get access to a pension – the responsibility lies solely with the employer. This legislation has been brought in because the life expectancy is rising and the retirement age is also on the rise. The idea is to ensure that people have enough money to live off when they come to retiring, as it’s feared there may be a shortage unless something is done.
What does auto enrolment mean for my company?
As we’ve already mentioned, auto enrolment is one of those things where the company needs to invest time and effort into implementing. However some companies do not have the capability or skill to do this, which leads to them outsourcing their auto enrolment duties to a specialist company.
This is a popular way of dealing with it for SMEs, but what exactly will your company be paying towards the scheme for your employees?
If you have more than one person working for you then you’re required to partake in auto enrolment.
As well as your company putting money into your employee’s pensions, the government will also supply a tax relief so let’s look at these exact contributions in a little more detail.
The contributions are something that will change over the years, so the first figures we’re going to look at are where the contribution amounts currently stand.
If an employee is enrolled on an auto enrolment scheme, the following are the minimum payments that must be contributed:
The employee will contribute a minimum of 0.8% of your earnings. The government would put in 0.2% at this rate, and the business would put in 1%.
However it’s important to note that this will have risen by 2018. It is stated by then that the following will be in place:
The employee will put in 4%, the government will put in 1% and the business will be responsible for 3%.
If you require more information you can take a look at this government guide.
Who is eligible for auto enrolment?
Even though you legally need to bring it into your workplace by your staging date, there are some people who may not be eligible to be a part of the scheme.
If they are below the age of 22 then they don’t need to be enrolled by you. However anyone else between 22 and state pension age must be accounted for.
They also need to earn more than £10,000 per annum and work in the UK.
What if my employees don’t want to enrol?
If you come across the situation where your employees don’t want to be part of the scheme, there’s not much than can be done until they are already enrolled. By law, all employees eligible must be enrolled onto the scheme, and then once they have enrolled they can then choose to opt out if they so wish.
It’s also important that any company respects the wishes of their employees. It is illegal to put pressure on staff to opt out of auto enrolment, and to disway them from continuing on the scheme if they want to.
Extra pension information
To keep up to date with pensions, employees will be sent statements. This is usually on a yearly basis but can differ. This will allow them to keep track of exactly how much money they’re saving, and whether they need to consider saving more if they don’t have as much as they like.
They may also be able to nominate someone to get their pension should they pass away before using it. It’s best to check with a pension provider to find out more about this.
If people are hoping to get access to their pensions, the current age ranges between 60 and 65. However, some may be able to withdraw with the youngest age this is possible usually 55.
However, people should be aware of scams trying to get access to their pension should they choose to take it out early. There are a few around, so it’s always best to be cautious when it comes to money for the future.
If employees leave their role, they’ll still have access to their pension in their current job. Employees can start a new one at a new work place or perhaps combine their new and old pensions into one. It’s up to them, but they should be able to get any money they’ve put in a pension pot no matter where they work.
If you’re worried about the auto enrolment process and would like some more advice, then why not visit the Auto Enrolment website today? We’re on hand to provide you with any pension help and assistance you require – so don’t miss out.
This blog was written by Sam Dickson on behalf of Auto Enrolment.