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The Government has introduced auto enrolment to help more people save for their future.

This means that employers will need to automatically enrol some workers into a workplace pension plan and give other workers the option to join. The government’s plan to implement a qualifying workplace pension scheme (QWPS) has already begun and will continue to be introduced over the next five years.  

As it’s mandatory for every employer, you have a duty to automatically enrol all your eligible employees to a workplace pension, who can then choose to opt out if they wish. This means you will be contributing to all eligible employees’ pensions who wish to be a part of the scheme.  

Eligible employees include those: Aged between 22 and state pension age   Earning over £8,105 (this amount is subject to change each year)   Younger than 22 or earning less than the trigger salary, but request to be part of the scheme     Employees will contribute a small percentage of their pay to their pensions, which will then be more than matched by an employer contribution.

How will it work?

Implementation will be staggered until September 2017, after that the contribution percentages will change. Here’s how it will work:

Dates

Minimum employer contribution

Minimum total contribution

Present- 30 September 2017

1%

2%

October 2017 - 30 September 2018

2%

5%

October 2018 onwards

3%

8%

 

Minimum total contributions include tax relief granted by the government.

How does this affect your business?

Even if you currently have a workplace pension scheme in place, you may have to change it to make sure it complies with the new regulations.

An organisation’s start date is determined by its size, dictated by number of employees on payroll. The process began in October 2012, starting with companies with over 120,000 employees on their UK payrolls, and will end in 2017.

Things you need to know:

  • You’re required to inform all employees about the automatic enrolment process and what being part of a QWPS will mean for them
  • You must automatically enrol every eligible employee
  • You’ll only need to make contributions for those employees who choose to stay in the scheme

It is possible to postpone the auto enrolment process by up to three months, but your employees do have the right to opt in during this time and benefit from the employer contribution. Employers may choose the postponement option for employees such as new starters.

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