Pensions - A Guide To Auto Enrolment

The Government is committed to encouraging everyone to make provision for retirement, and it sees contributing through the workplace as the most effective way of doing this.

From 2012 onwards, it is introducing two major reforms to workplace pension provision.

Firstly; NEST (National Employment Savings Trust).

Any employer who does not have a pension scheme for staff must either introduce one which qualifies for certain minimum standards or sign up to NEST.

This is a new national pension scheme, designed to be low cost, simple and flexible.  Both employers and employees will be obliged to contribute.  This is at a rate of 3% for employers and 4% for employees.  Added to the employee contribution is 1% tax relief, making a total contribution of 8%.

Secondly; Auto-enrolment.

The Government intends that the default position should be that all employees are in a pension scheme, unless they specifically opt out.  So, from 2012 employers will have to enrol all their eligible employees (virtually everyone is included) either into NEST, or into their own pension scheme alternative.

If an employer nominates its own pension scheme it must be at least equivalent to NEXT in having a minimum level of employer and employee contributions.

These reforms will affect all employers but not all at the same time.  They are being introduced over a period starting with the very largest employers in October 2012.  Other employers will follow during 2013-2016.

Each individual employer has been issued a staging date, based on the number of PAYE employees they have and their PAYE reference number.

The contribution rate is also due to be phased in, building up to the full employer rate of 3% which will come into force in 2017.

Although the introduction of auto enrolment is some way off it has a number of implications which employers should start considering.

Here are some steps that you can take now:

Find out your staging date.

Assess your workforce for eligibility.

Assess any current pension arrangements against the qualifying criteria.

Ensure that you can implement a system to manage your obligations.

Communicate changes to staff.

For more information or to discuss your particular circumstances contact:

Colin Rodger, Head of Pensions at Alexander Sloan Financial Planning Ltd.

csr@alexandersloan.co.uk

Or your usual Alexander Sloan contact.