workplace pension reform – quick update

In the run up to 2014 (for most Green Financial employer/pension clients) please find following a quick update

The pension scheme you have in place as an employer has a number of standards as a minimum to be met. These include the benefits it provides and the amount of contributions paid to it. Another standard is auto-enrolment for all eligible workers and for any new employees when they become eligible.


Who or What is ‘eligible’?
An eligible employee is someone earning above the income tax personal allowance (2011/12 = £7,475). They must be between the ages of 22 and the state pension age, which varies depending on when you were born and if you are a male or female. You can find out your state pension age on this government web page : http://www.direct.gov.uk/en/Pensionsandretirementplanning/StatePension/DG_4017919

Qualifying earnings
For auto-enrolled employees these are between £5,035 & £33,540.

Contributions
Eventually, when all the various phases have finalised, there will be a contribution of 8% of qualifying earnings to the pension. This will be made up of a minimum of 3% from the employer, with 4% from the employee and the remaining 1% as tax relief.

This will need to be in place by October 2017. Until then, from Oct 2012 to Sept 2016 the minimum will be 2% of qualifying earnings with at least 1% from the employer and Oct 2016 – Sept 2017 a total of 5% with at least 2% from the employer.

However, there are ‘staging dates’ for taking part as an employer depending on your size, as measured by number of PAYE employees. Big companies with 120,000 or more employees are first, in October 2012. Then until July 2013 other companies join in. Those with less than 3,000 employees will be summer 2013.

Those employers with 50 – 250 employees will be spring to summer 2014 and those employers with less than 50 employees phased in from summer 2014 to autumn 2016. The exact date will depend on your tax reference.
Clients of Green Financial can contact us to discover their exact date if they wish to know it. We will be in touch nearer the time though.

The main consideration at this time is budgetary – the employer contributions will need to be funded and budgeted for so it is worth starting to consider now.


There is more generic information regarding workplace pensions and NEST here on this government web page
http://www.direct.gov.uk/en/Pensionsandretirementplanning/Companyandpersonalpensions/WorkplacePensions/DG_183783

After all this regarding auto-enrollment criteria, employees will be able to opt out of auto enrolment! More info here:
http://www.direct.gov.uk/en/Pensionsandretirementplanning/Companyandpersonalpensions/WorkplacePensions/DG_200723