Setting up a workplace pension
Compulsory Auto-enrolment schemes
What is auto-enrolment? Auto-enrolment is part of new legislation introduced by the government in October 2012. The legislation requires all UK employers to automatically enrol all employees that meet the qualifying criteria (depending on age and salary level) into a pension scheme. The scheme itself also needs to meet certain government requirements. This will be rolled out fully over a five and a half year period. UK companies with the largest workforce are first to participate, with their staging dates beginning in October 2012, followed by medium sized companies and finally small and micro companies.
Why has auto-enrolment been introduced? The regime has been introduced simply to increase pension savings. It is designed to encourage people to think more about how they will fund their retirement. This is crucial as we are now living longer than ever before – allowing us the opportunity to enjoy retirement for longer too. However, UK retirees will lack the means to do so if current trends of inadequate savings persist. Being automatically enrolled into a pension, with the added bonus of their employer's contributions and tax relief, should dramatically boost the number of UK adults preparing for their retirement years more sufficiently.
Who will it affect? Auto-enrolment will affect all UK companies. They are legally obliged to set up a workplace pension for their employees, which complies with the government's auto-enrolment regulations. Auto-enrolment will also affect everyone who is employed, aged between 22 and state pension age, earning over £9,440 per annum.
|Eligible Jobholder||Must be enrolled||Between 22 & State Pension Age (SPA)||Earns above the auto-enrolment trigger of £9,440|
|Non-eligible Jobholder||Does not have to be auto-enrolled but can choose to opt-in||
|Entitled worker||Does not have to be auto-enrolled but are entitled to join||Between 22 & SPA||Earns below lower earning threshold (£5,668)|