UK employers should be aware of what automatic enrolment changes might mean, and that through early planning they can be ready for the challenges of this brave new pensions world.
Improving private pensions – compulsory pension provision
The changes to private pension plans are just as significant. In the UK, it’s not common practice to have auto-enrolment into pension schemes, unlike on the continent. But from October 2012, in stages until September 2016, all employers in the UK (except single person companies) have to automatically enrol all their ‘eligible jobholders’ into a pension plan by a specified date . Large employers will have to start to auto-enrol their employees into a pension plan first, followed by medium sized employers, then it’s the turn of the smaller firms. Employers can bring their automatic enrolment date forward, if they wish.
Jobholders then have a choice. They can decide pension saving isn’t for them and opt out of the plan. Or they can remain a member, and if so, the employer has to pay a minimum contribution of at least 3% of a band of total earnings, and the individual will have to contribute 4%. The Government gives 1% as tax relief, making an 8% total contribution. Contributions will also be phased in to the full 8% of band earnings up to October 2017. Employers and employees can choose to pay more than the regulatory minimum.
Read more in the full article (5 pages).
