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Automatic enrolment – Why Sign up an introduction

Under a law introduced in 2012, all employers must eventually offer a workplace pension scheme and automatically enrol eligible workers in it. This requirement has applied to larger employers since October 2012 and will apply to all employers by 2018.

How are workplace pensions changing?

To help more people save for their retirement, the government has made major changes to how workplace pensions operate.

In the past it was up to workers to decide whether they wanted to join their employer’s pension scheme. But by 2018 all employers will have to automatically enrol their eligible workers into a workplace pension scheme unless the worker opts out. As a result, many more people will be able to build up savings to help cover their retirement needs.

When does automatic enrolment start?

Automatic enrolment is being introduced in stages up until 2018. The largest employers started first, followed by medium-sized and then small employers. If you haven’t yet been enrolled in a scheme, your employer will tell you the exact date of it will begin automatic enrolment and whether or not you’re eligible for their scheme.

Who will be automatically enrolled?

Whether you work full time or part time, your employer will have to enrol you in a workplace pension scheme if you:

  • Are not already in a suitable workplace pension scheme
  • Are at least 22 years old, but under State Pension age
  • Earn more than £10,000 a year (tax year 2015-16)
  • Work in the UK

As long as you meet these criteria you’ll also be covered if you’re on a short-term contract, or an agency pays your wages, or you’re away on maternity, adoption or carer’s leave. If you earn less than this you can ask to be enrolled and, as long as you earn more than a certain amount, your employer has to enrol you and make contributions for you.

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Do I have any choice about being enrolled?

You can opt out of your employer’s workplace pension scheme after you’ve been enrolled. But if you do, you’ll lose out on your employer’s contribution to your pension, as well as the government’s contribution in the form of tax relief.

If you decide to opt out, ask the people who run your employer’s workplace pension scheme for an opt-out form. You must then return your completed form to your employer, not to the people who run the scheme.

If you decide to opt out within a month of being enrolled, any payments you’ve made into your pension pot during this time will be refunded to you.

After the first month, you can still opt out at any time, but any payments you’ve made will stay in your pension pot for retirement rather than be refunded.

You can re-join your employer’s workplace pension scheme at a later date if you want to. By law your employer must re-enrol you back into the scheme approximately every three years, as long as you still meet the eligibility criteria.

How much will I have to contribute?

There is a minimum total amount that has to be contributed by you, your employer, and the government in the form of tax relief. This total minimum contribution is currently set at 2% of your earnings (0.8% from you, 1% from your employer, and 0.2% as tax relief). In 2017 and 2018 the amounts will increase.

The minimum contribution applies to anything you earn over £5,824 (in the tax year 2015-16) up to a limit of £42,385. This includes overtime and bonus payments. So if you were earning £18,000 a year, your contribution would be a percentage of £12,176 (the difference between £5,824 and £18,000).

Your employer will let you know how much of your earnings you’ll need to contribute. They may tell you this as a sum of money or as a percentage. If they give you a percentage, you can find out what it means in pounds and pence using our Workplace pension contribution calculator.

Increases in the minimum contribution

The total minimum contribution is currently set at 2% of your earnings (0.8% from you, 1% from your employer, and 0.2% as tax relief). From April 2018, it will increase as follows:

April 2018 to March 2019: 5% of your earnings (2.4% from you, 2% from your employer, and 0.6% as tax relief)

From April 2019 onwards: 8% of your earnings (4% from you, 3% from your employer, and 1% as tax relief)

Should I stay in or opt out?

For most people, staying in a workplace pension is a good idea, particularly if the employer is contributing to it. Workplace pensions are a great way to save for retirement. However, there are circumstances in which it might not make sense to stay in – for example, if you are dealing with unmanageable deb

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Understanding Auto Enrolment

The Crux of the Matter ..The Issues

UK law for workplace pensions has changed to encourage employees to save for their retirement. In the near future, all employers will be required to provide a workplace pension for eligible employees and contribute to a pension scheme that meets qualifying standards.

The following is an extract from the Pensions Regulator website.

Key points:

  • Automatic enrolment affects all employers with staff in the UK.
  • You must enrol certain staff into a pension scheme.
  • You must start doing this from your staging date, though there is an option to postpone automatic enrolment for up to three months.
  • You must write to all your staff to tell them how they've been affected.

What is automatic enrolment and why do I have to do it?

People are living longer yet too many people are under-saving or not saving at all for what could be a long retirement. The law on workplace pensions has changed to make it easier for millions more people to build up a pension, particularly those on lower incomes.

Automatic enrolment means that, rather than having to actively choose to join a pension scheme, staff are put into one by their employer as a matter of course. If they don't want to be in the pension scheme, they must actively choose to opt out. It's to encourage people to stay in pension saving.

When will I have to do it?

Automatic enrolment duties come into force for you from your 'staging date'. You can find out your staging date by entering your PAYE reference into our tool. It also appears on any letters sent to you about your duties.

For more information go to what is my staging date?

You will have the option to postpone automatic enrolment for up to three months from your staging date. If you decide to do this, you won't need to enrol anyone until the end of the postponement period.

For more information go to postponement.

Who do I need to put into a pension scheme?

You must automatically enroll all staff who are:

  • Aged 22 to state pension age
  • Working in the UK
  • Earning over £10,000 a year

Some staff who don't meet the criteria above are able to opt in to the pension scheme you're using for automatic enrolment. You must put them in if they ask. You'll have to pay a minimum employer contribution for all staff you put into this scheme.

Certain other staff can ask to join a pension scheme. You must put these staff in a scheme, but the rules are different and there's no requirement for you to pay an employer contribution. It's the age and earnings of a member of staff that determines what 'type' of worker they are and therefore what duties you'll have for them.

For more information go to know your workforce.

What else do I need to do?

You'll need to write to each member of staff individually to tell them how they've personally been affected by automatic enrolment. The information you'll need to tell them is different depending on their rights and the duties you have for them.

You must also provide certain information to the regulator about how you've complied with your duties.

Where do I start?

The first thing you should do is find out your staging date. Once you know when this is, you can start planning to make sure you're ready in time.

Start planning early

You'll need to make some changes to allow for automatic enrolment, such as:

  • Setting up a pension scheme or modifying an existing one.
  • Making any necessary changes to payroll so it can handle the new requirements.
  • Putting systems in place to monitor the ages and earnings of your staff (your payroll may be able to do this).
  • Writing to your staff.

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