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Pensions Auto Enrolment

Frequently Asked Questions

What are the new regulations and what do they mean?

Under the Pensions Act 2008 employers will be required to automatically enrol their eligible workers into a workplace pension scheme.

Employers must provide full information of their pension scheme to workers and confirm that they have been automatically enrolled, the date of enrolment and that the worker has the right to opt out if they wish.

Which workers need to be auto-enrolled?

Workers are divided into three categories depending on age and earnings which will determine an employer’s duties with regards to automatic enrolment.

The categories are:

Category Detail Automatic Enrolment?
Eligible Jobholder Worker aged between 22 and State Pension Age; Annual earnings of £9,440 and above Yes
Non-Eligible Jobholder Worker aged between 16 and 21 OR between State Pension Age and 74 with annual earnings of £9,440 and above; Worker aged between 16 and 74 with annual earnings between £5,668 and £9,440 No - although enrolment will apply if the worker requests to participate in a pension scheme
Entitled Worker Workers with annual earnings of £5,668 and under No

* Earnings thresholds are current for 2013/2014 tax year

How do employers assess their workers?

Employers will be required to carry out assessments of their workforce at certain key points. The purpose of the assessment is to identify which workers fall into the applicable categories to allow the employer to carry out the relevant duties.

The assessment dates include:

  • The employer’s staging date
  • The worker’s first day of employment
  • The date that a worker’s status changes (if applicable) for e.g. if a worker turns 22 years old or has a salary increase and becomes an eligible jobholder
  • The deferral date of automatic enrolment if the employer is using postponement

At each of these key assessment points, the employer should determine which of their workforce is eligible, non-eligible or entitled with regards to automatic enrolment.

When do the regulations come in to effect?

The auto-enrolment rules have been introduced in a phased approach according to the size of the employer’s payroll.

The first staging date took place in October 2012 for organisations with 120,000 or more workers on their payroll and future staging dates will continue throughout 2013 to the final staging dates in 2015.

How do I establish the staging date for my organisation?

The Pensions Regulator will communicate with each employer to confirm their applicable staging date 12 months and 6 months in advance.

However, you can contact the Regulator directly via www.thepensionsregulator.gov.uk to request confirmation of your staging date.

Can employers defer auto-enrolment until after their staging date?

There is an option which allows employers to delay enrolling their workers for a 3 month waiting period, commonly known as ‘postponement’.

Postponement can be applied either from the start date of the worker’s employment, the staging date of the employer or the date that a worker becomes an eligible jobholder. Upon reaching the deferral date the employer will be required to assess the worker to identify which category the worker falls into (eligible, non-eligible or entitled).

What are the minimum contributions employers need to make to a pension scheme?

There will be a mandatory minimum contribution of 2% (1% of an employee’s earnings and 1% matching employer contribution), rising to 5% (3% of an employee’s earnings and 2% employer contribution) in October 2017.

Can workers or employers opt-out of the auto-enrolment rules?

Employees can elect to opt-out of a pension if they wish, however employers cannot offer any incentive to do so or place workers who wish to remain opted in at a disadvantage.

Can employers offer a cash incentive in lieu of automatically enrolling a worker into a pension scheme?

No. There are strict anti-avoidance measures in place to manage compliance with the auto-enrolment duties. The measures are in place to ensure employers comply with their duties under the regulations and any offer of cash equivalent incentives to encourage workers to opt out of enrolment would be viewed as avoidance.

QUESTIONS?

For support regarding Auto-Enrolment please contact:
UK-Pensions@hudson.com

 
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