Pension Auto Enrolment is Coming Your Way

Most employers have heard of pension auto enrolment - but all too many have done little or nothing about it. It simply cannot be ignored, and all employers should act now to ensure that they meet their statutory responsibilities - or face a penalty.

Auto enrolment is a system under which employers must enrol certain employees into a pension scheme. It is being phased in gradually, with employers of 500 or more staff already being in the system. Smaller employers will be brought in by 2017, the exact “staging date” for those with fewer than 50 employees being determined by their PAYE reference. Every employer should ?nd out their staging date - check on www.thepensionsregulator.gov.uk.

All employees who earn above a minimum level (currently £9,440 a year), aged between 22 and state pension age, must be enrolled in a pension scheme, subject to their right to opt out. Younger and older employees have a right to opt in. Initially, the minimum pension contribution must be at least 2% of earnings, with a minimum 1% from the employer, but this will increase to 8%, with a minimum 3% from the employer.

So apart from ascertaining their staging date, what must employers do?

• If you already have a pension scheme, you will need to make sure it meets all the criteria as de?ned in the new legislation

• If you don’t have a pension scheme, you will need to set one up - or use one of the default providers such as the National Employment Savings Trust (NEST)

• Initially you will need to auto-enrol all qualifying staff into the scheme. Every three years you will need to re-enrol any who have opted out

• You must monitor earnings to ensure your scheme meets the minimum contribution levels

• You must collect contributions and forward them, along with all necessary supporting documentation, to your chosen pension scheme provider

• You must register your scheme with The Pensions Regulator, provide information about the pension scheme to your employees, and keep detailed records.

There really is no time to lose - the Pensions Regulator suggests that employers start planning at least 12 months before their staging date, and it is an inevitability that pension providers and advisers will be hugely busy as large numbers of small employers are brought into the system. If in doubt, speak to your usual contact at James Cowper Kreston who can introduce you to specialist pension advisers to determine what is best for you and your employees.