Automatic enrolment – are you ready?

The biggest change in work based pensions for 100 years is currently underway.

Automatic enrolment – whereby employers must enrol their eligible employees into a qualifying pension scheme – aims to get 6million employees contributing towards their pension funds by 2018.

From October 2012, beginning with the largest employers of UK employees, there will be a requirement by law to pay into a workplace pension for all eligible staff who choose not to opt out of the scheme.

This means that anyone over the age of 22, earning in excess of £8,105 and working for an employer who is affected will be automatically enrolled into the government scheme. This is unless the employer is able to implement a scheme which qualifies within the rules, before they are required to enrol for the government scheme.

For smaller employers, the scheme is to be phased in over the next five years.

Employers must automatically enrol eligible workers (mainly employees but the definition also includes some contractors and agency workers) into a qualifying pension scheme and make a contribution to it. Even where an employer already offers a pension scheme to employees it will still be necessary to ensure that the scheme meets all of the conditions of the new rules.

The Pensions Regulator is responsible for notifying smaller employers of the date by which they must join up. However, their data is based on the information HMRC hold on the size of PAYE schemes as at April 2012, which could result in some employers being notified that they must comply at an earlier date than the employer had planned for.

As a consequence, smaller employers would be well advised to start preparing sooner rather than later. It will take time to ensure there is an eligible scheme in place and it must notify all eligible workers.

If you would like more information or details on how Sedulo can help you plan for automatic enrolment, please contact either Darrell Booth or myself and we will be happy to help.

This blog post was written by Darrell Booth, Head of Tax for Manchester accountants and business advisors, Sedulo.

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