Prior to 1 October 2012, “micro” employers (with less than five employees) were under no legal obligation to provide those employees with pension benefits, whilst employers with five or more employees were only required to provide employees with access to a stakeholder pension scheme. Employers were not, however, required to contribute into a pension scheme on behalf of employees.
The Pensions Act 2008 has changed all that. With effect from 1 October 2012, employers will be required to enrol eligible jobholders into a qualifying pension scheme unless they are already members of such a scheme. Employers can either use their own qualifying pension scheme or the government’s National Employment Savings Trust, known as NEST.
There is some temporary respite from these provisions for smaller employers. The Pensions Regulator’s website lists the staging dates for this auto-enrolment process (www.tpr.gov.uk/staging) based on the number of employees on an employer’s PAYE scheme. Each employer should be contacted by the Pensions Regulator between six and 12 months before their staging date. However, the aim is for all employers to be compliant by April 2017.
In addition to the actual auto-enrolment process, some new obligations for employer are to (1) contribute a minimum of 3% of each eligible jobholder’s earnings, (2) tell enrolled jobholders that they have been automatically enrolled and that they may opt out if they want to, and (3) register with the Pensions Regulator to provide details of the qualifying scheme chosen and the number of people that have been automatically enrolled.
The Pensions Regulator has helpfully put together a beginner’s guide to auto-enrolment, which can be found at http://www.thepensionsregulator.gov.uk/employers/beginners-guide-to-auto-enrolment.aspx.