The Government is trying to reduce apathy towards saving for retirement by making employers automatically enrol their employees into a workplace pension without requiring any paperwork from them. The employer has to provide some basic details to the scheme administrator but the employee will not be required to do anything. The Government hopes this approach, together with the requirement on employers to make contributions in respect of most staff, will improve the take up of pensions amongst employees.
The requirement to auto enrol employees applies to certain categories. Not everyone may need to be auto enrolled but employers need to include employees who haven’t joined any existing arrangement either because they have chosen not to or because they are not eligible.
|Eligible jobholders||Description All UK employees aged between 22 and State Pension Age who earn over £10,000 per year.*||Requirement Must be auto enrolled|
|Non-eligible jobholders||Description Employees aged at least 16 but not yet 75 and earn between £5,876 per year and £10,000 per year or aged between 16 to 21 or State Pension age to 75 and earning above £10,000 per year.*||Requirement May ask to join and then employers must pay contributions in respect of them. Do not need to be auto enrolled.|
|Entitled workers||Description Employees who earn under £5,876 per year.*||Requirement May ask to join, employers need to collect and pay employee only contributions for them. The employer does not need to contribute and they do not need to be auto enrolled.|
* Based on the 2017/2018 tax allowances (this will change each April)
Once the relevant individuals have been identified,the Cheviot auto enrolment calculator can help employers work out how much it is likely to cost their business in contributions.
Existing schemes probably enrol members by issuing a booklet about the scheme and asking them to complete an application form when they become eligible. The scheme administrator may then ask for some other details direct from the member such as a birth or marriage certificate, details of investment choices etc. Some employees may not have joined the scheme, either because they can’t afford it or because they simply have not bothered to complete the form because they don’t think pensions are interesting or important.
Even employers with an existing scheme which meets the minimum requirements,will still need to auto enrol any employees who have not joined before and any new employees.
It is likely that existing procedures will have to change.
The administration could be quite difficult. It is important that payroll providers are able to help with the process.
The key elements are:
See administration issues for more information about opting out.
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