Workplace Pensions
04 Jan 2012
From this October, employers with over 120,000 employees will have to start enrolling employees into a pension scheme.
For companies with fewer employees, the start date (known as the staging date) will be later:
Number of staff staging date
240-249 1st April 2014
150-239 1st May 2014
90-149 1st June 2014
50-89 1st July 2014
For those with less than 50 employees, auto-enrollment will commence from May 2015 (instead of the previously announced April 2014).
Employers must pay a minimum of 3% of ‘qualifying earnings’, with employees paying 4% (plus 1% tax relief) to achieve the 8% minimum contribution. However, contributions can be built up from the staging date – for example 1% employer and employee up to October 2016, 2% each till October 2017, and then 3% employer and 4% employee from October 2017.
By October 2017 the full contributioon of 8% must be paid - of which 3% is from the employer. The remaining 5% can be employer contributions instead of employee – and could be borne in mind when pay rises are being negociated.
All employees (including part time workers) aged 22 to 65 are affected if they are earning in excess of £7,475pa. Contributions are actually based on ‘qualifying earnings’ – between £5,715pa and £38,185pa (including overtime and bonuses).
Companies should now identify their staging date, identify those staff who are eligible, assess the additional costs involved and budget accordingly. The challenge for employers will be the administration as records must be kept for each employee such as total earnings and contributions made, and retained for at least 6 years.
If you would like more information on how workplace pensions will affect your company and the options available, please contact us >>
Written by Colin Caulfield | Director
Colin is a Chartered Financial Planner & Pension Adviser Of the Year Read more >>
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