Auto-Enrolment is the new Pension legislation that requires all companies to automatically enrol their eligible workers into an approved workplace pension and pay employer contributions.

Any business that employs one or more workers.

Commences with the largest companies in October 2012. It will be staged over 4 years with each company being allocated their own staging date.

These are the dates assigned to each company from when they must commence auto enrolment. Staging dates start October 2012 and continue through to 2017. For companies with over 50 employees it is based on the headcount, otherwise it is based on the company PAYE reference number.

There are different types of workers; all are affected in some way. They are eligible, non-eligible and entitled.

An eligible worker is a job holder with earnings of at least £7,475 in a tax year, who is aged from 22 to SRA (state retirement age).

A worker aged at least 16 and under 75, working or ordinarily working in the UK with qualifying earnings payable by the employer between £5,035 and £7,475. Or aged at least 16 and under 22 or between state pension age and under 75 have qualifying earnings payable by the employer above £7,475. These workers may opt to join the scheme and the employer must then pay contributions.

A worker aged at least 16 and under 75, working, or ordinarily working, in the UK and have qualifying earnings payable by the employer below £5,035. These workers may opt to join the scheme but the employer is not obliged to make contributions.

This is the range of earnings in a relevant pay period that are eligible for contributions.
For the current tax year it is £5,035 – £33,150

The lower earnings threshold is currently £5,035, the automatic enrolment trigger is £7,475 and the upper earnings threshold is £33,540. These figures are subject to change. As part of their recent consultation, the Department for Work and Pensions (DWP) have proposed an amended set of income thresholds. These will be updated once in effect.

A suitable pension scheme for auto-enrolment is known as a Qualifying Workplace Pension Scheme. This could be the government default scheme known as NEST (National Employment Savings Trust) or an approved Money Purchase Scheme.

Contributions are compulsory for employers and will be phased in as follows:

From October 2012 – minimum 3% of qualifying earnings of which the employer must pay 1%

From October 2017- minimum 5% of qualifying earnings of which the employer must pay 2%

From October 2018 – minimum 8% of qualifying earnings of which the employer must pay 3%

There are a range of duties the employer must abide by, including keeping records and reporting back to The Pension Regulator. The administrative duties can be both complex, time consuming and costly if not well prepared.