From 1 October 2012, employers will have a legal obligation to automatically enrol "eligible jobholders" into a workplace pension. Employers can either use NEST (National Employment Savings Trust), the government's workplace pension scheme or their own existing pension schemes, provided they meet certain relevant requirements.
There will be a "staging date" from October 2012 to 2016, for employers to meet the requirements, starting with the largest employers. This will be based broadly on the number of people in your PAYE scheme. See Related links to check your likely staging date.
Who are "eligible jobholders"?These are workers who:
Contributions under NEST
Contributions will be phased in over a period of five years for employers and employees. Employers must contribute at least 3% of a worker's gross qualifying earnings. This does not include any earnings above the upper earnings threshold (currently £33,540). Qualifying earnings include salary, wages, commission, bonuses, overtime, statutory sick pay and statutory maternity, paternity and adoption pay.
Employees must contribute a minimum of 4% of qualifying earnings. They will also receive 1% tax relief, resulting in a total of a minimum of 8% combined contribution, together with the employer's contribution.
If an employer wishes to use its own pension scheme, rather than NEST, it must satisfy the relevant requirements for a qualifying scheme. Defined benefit ("DB") schemes have to be certified by the actuary and the employer. We can advise further on the relevant requirements, which depend on how your scheme is structured.For a defined contribution ("DC") scheme that makes contributions based on "pensionable pay" rather than "qualifying earnings", three self-certification options are available. They are:
What else must I do?You need to:
Can I avoid this?
Employers cannot induce workers to opt out of a qualifying pension scheme or make job offers conditional on opting out. The Pensions Regulator will police employer compliance. Large employers that do not comply could be liable for escalating penalties of £10,000 a day with criminal penalties for "wilful" failure to comply.
What should I do next?
This publication is intended for general guidance and represents our understanding of the relevant law and practice as at April 2012. Specific advice should be sought for specific cases; we cannot be held responsible for any action (or decision not to take action) made in reliance upon the content of this publication.
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