Workplace Pension Reform & Automatic Enrolment (AR) – An update
Information in this article should not be taken or relied upon as personal financial advice. Any individual requiring information or advice on their own specific circumstances or on their own account should contact a suitably qualified professional.
More Detail on When will AR happen?
It would not be practical for all employers to implement the new rules on the same day so the new employer duties will apply to the largest employers first with effect from 1 October 2012. The gradual phasing in of AR is known as “staging”.
Each employer’s staging date will be based on the number of employees in the PAYE scheme on 1 April 2012 whereby the largest companies will have to comply by 1 October 2012. Smaller companies will be gradually phased in between 2014 and 2017. Phasing dates fall into several categories, for example:
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|Number of employees in PAYE Scheme||Staging Date|
|250 or more||October 2012 to February 2014|
|50-249||April 2014 to April 2015|
|Fewer than 30||Between June 2015 and April 2017|
For businesses which fall into the last category, the actual date will be determined by the employer’s PAYE reference.
What are the current rates for qualifying earnings?
Contributions will be made on a band of earnings, called the ‘Personal Accounts Earnings Band’ which is currently income between £5,564 and £42,475.
Earnings from employment will include
- Salary or wages
- Overtime payments
- Bonuses and commission
- Statutory sick pay, statutory maternity and paternity pay
Eight steps to prepare for Automatic Enrolment
Employers must act now in order to be prepared for AR and they must:
- Establish their staging date.
- Assess their workforce and identify all eligible jobholders.
- Review their pension scheme to see if it will be suitable for AR. If it is not then the choice must be made between using NEST and setting up a new scheme.
- Communicate the changes to all employees. This is a vitally important stage in the process and it must explain in a prescribed form how they will be affected by automatic enrolment in the workplace.
- Automatically enrol all eligible jobholders on the appropriate date.
- Register the pension scheme with the Pensions Regulator.
- Make contributions to the scheme.
- Ensure that systems are in place for dealing with all new employees and those employees who are already in the pension scheme.
Large businesses with several hundred employees usually have human resources departments which will have already done all the necessary work to ensure that the employer complies with the new regulations.
For smaller companies, the responsibility may fall to just one person – perhaps YOU! It is likely that you will require some outside assistance in seeing through the compliance process – if so, contact me at email@example.com or by post or telephone – details below.
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