The law is changing and every employer will have to act. The new law requires all employers with at least one worker to automatically enrol certain members of their workforce into a suitable pension scheme and to make contributions to it.
The law comes into force for employers between 2012 and 2018. Each employer will be allocated a date from when the duties will first apply to them, known as their staging date. The date is based on the number of people in an employer’s PAYE scheme at 1st April 2012. The earlier staging dates are for those employers with the largest number of workers. Employers can check their provisional staging dates on www.tpr.gov.uk/staging. You should note that some of these dates have been moved forward since the initial government publication.
- Automatically enrol eligible employees into a qualifying pension scheme
- Make contributions on behalf of their workers. Minimum contributions of qualifying earnings for both employers and employees are being phased in as follows:
Minimum Employer Minimum Combined
Period Contribution Contribution
01/10/12 – 30/09/17 1% 2%
01/10/17 – 30/09/18 2% 5%
01/10/18 onwards 3% 8%
The employee contribution includes basic rate tax relief.
- Register with The Pensions Regulator via an online process
- Communicate certain information to their employees in writing particularly about changes
- Fully comply with the pension law to avoid fines and prosecution. Fines can be up to £10,000 per day for the largest employers.
Eligible employees are those:
- Aged between 22 and state pension age
- Working, or ordinarily working, in the UK
- Earning above £9,440 (which is the Income Tax personal allowance currently, and therefore possibly rise to £10,000 in 2014/15). This amount is reduced to £5,668 in 2013/14 for those over the state pension age.
Employers with an enrolment duty will need to choose a pension scheme that meets the minimum criteria. It is possible to use an existing scheme which will require a process of certification or set up a new one with a pension provider assuming it meets the criteria. In addition there is the National Employment Savings Trust (NEST) which has been established by Government to ensure that employers comply with their automatic enrolment duties. If you, as an employer, do not already have a scheme which meets all the requirements, jobholders will be enrolled in the government’s NEST scheme, which has a contribution limit of £4,600 in 2013/14 per employee.
The Pensions Regulator will have the power to impose penalties for non-compliance with notices issued for contraventions of the employer responsibilities. Any employer failing to engage with the reforms despite the provision of information and support will be charged a flat rate penalty of £400. In addition there will be escalating penalty notices intended to address entrenched employer behaviour and this will vary from £50 per day for one to four workers up to £10,000 per day for 500 plus workers. There will also be penalties which will deter employers from trying to screen out at the recruitment process any job applicants who may want to save in a qualifying workplace pension scheme.
If you are concerned about if or how these changes will affect your business we have a team of experts within both KMP and Park Lane Financial Services who will gladly assist you.
Further information can be found here.