AUTO ENROLMENT - KEY QUESTIONS

Auto Enrolment - Key Questions

Auto enrolment, part of the government’s workplace pension reforms, has been introduced to combat the issue that people are living longer and healthier lives but are saving less for their retirement.

 

As the ratio of workers to those of a pensionable age continues to fall, the government has estimated that as many as seven million people are currently not saving enough for an adequate retirement income.

 

As state pensions will be unable to bear the increasing numbers of retirees, The Pensions Act 2008 established new duties to redress this imbalance. Automatic enrolment, as part of these changes, began to be rolled out amongst businesses in October 2012.

 

The changes brought about by the new legislation are complex and require early education and preparation to allow businesses to gain a full understanding of how to capitalise, adapt, and ensure compliance.

 

With 32,000 businesses staging during the 2014-2015 financial year, the numbers seeking support and advice about the legislative transition will increase considerably.

 

How is your staging date calculated?

 

• Your staging date is based on the PAYE data provided to The Pensions Regulator (TPR) by HMRC on 1st April 2012 – employers will then be contacted by TPR 12-18 months before their staging date and then again 3 months before their staging date

• Your PAYE count is not necessarily equal to your number of employees

• You may have an earlier staging date if you have at least one person paid under a PAYE scheme larger than the employer’s “main PAYE” (e.g. parent company’s PAYE reference).

AUTOMATIC ENROLMENT MYTHS AND TRUTHS

AUTOMATIC ENROLMENT

Automatic enrolment is the biggest change to pensions in decades But, with so many people talking about it, it can be difficult to know what is and isn’t true.

 

Background to automatic enrolment

People are living longer, with healthier lifestyles; as a result, the ratio between the workforce and those at pensionable age is decreasing. People are also planning and saving less for their retirement.

 

The government estimates that around seven million people are not saving enough to give them the retirement income they want or expect. The current state pension cannot sustain this change, so as a result, workers are being encouraged to save for their retirement through workplace pension schemes.

 

The Pensions Act 2008 established new duties on employers aimed at tackling these issues and the changes began to be rolled out to businesses in October 2012.

 

AUTO ENROLMENT – MYTH

Automatic enrolment means every worker in the UK will be forced to save into a workplace pension, without being given a choice.

AUTO ENROLMENT – TRUTH

There are certain criteria which workers must meet to be eligible for automatic enrolment.

AUTO ENROLMENT – MYTH

Any pension scheme can be used for automatic enrolment. If I have a pension scheme in place this will be suitable.

AUTO ENROLMENT – TRUTH

Not necessarily.

Pension schemes can be used for automatic enrolment only if they meet certain criteria which have been set out by The Pension Regulator.

The scheme must reach certain quality standards so that employees get the most from their contributions.

 Employees who are eligible:

• Aged between 22 and the state pension age

• Working in the UK

• Earning above the minimum earning threshold If a worker meets all three of these criteria, he or she is classed as an ‘eligible jobholder’ and will be automatically enrolled into a workplace pension scheme.