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Pension Auto Enrolment is on its way!

As you may have heard in the news lately, we’re all living longer but a growing proportion of the population are not saving for retirement. Therefore the Government is bringing in new legislation to try to ensure that people are better prepared financially for their retirement.

The Pensions Acts 2008 and 2011 fundamentally reform pension provision in the workplace because, for the first time in UK law, they require every single employer, including contractors employed through umbrella companies, to automatically enrol their workers into a qualifying workplace pension scheme, if they are not already in one, and to mandatorily contribute to that pension. The worker will also be required to make contributions.

The provisions will be phased in on a gradual basis, starting from 1 October 2012, depending on the size of the employer. Under the staging timetable, all existing employers will have completed auto-enrolment by 1 April 2017 and all new employers (i.e. those set up between April 2012 and September 2017) by 1 February 2018.

Eligible jobholders

Every employer will be obliged to make arrangements to automatically enrol their workers who are not already in a qualifying workplace pension scheme into a qualifying workplace pension scheme if those workers:

  • are at least 22 years old but have not yet reached State Pension Age;
  • earn more than the minimum earnings threshold in the relevant pay reference period (this has been set at £8,105 per year for tax year 2012/13, which is the PAYE income tax threshold);
  • and work, or ordinarily work, in the UK under their contract.

Such workers are known as eligible jobholders and they must be automatically enrolled.