So you’re an employer operating in the United Kingdom with at least one employee. But are you aware of the coming changes to pensions, and how they’ll directly impact your business? If you don’t know about automatic enrolment, for example, or staging date, then you need to get to grips with the forthcoming changes, as a matter of priority. They’ll affect you, so don’t put things off. Start getting clued up now!
The first point to take on board is that you, the employer, will be legally responsible for enacting the new changes, which will begin to come into force for larger employers in 2012. Firms with fewer employees will have a bit more time, but not much more.
The terms ‘worker’ and ‘eligible jobholder’ are at the heart of the changes. What is a worker? A worker is someone you employ who earns the national minimum wage. This can also include contract and agency workers, and apprentices, too. You may already offer them some kind of pension arrangements. Maybe not. Under the new arrangements, you’ll have to explain what pension scheme you’re offering and give them all the opportunity to join it.
Eligible jobholders are employees who earn more than minimum wages and are aged between 22 and the state pension age. They must also ordinarily work in the United Kingdom. Under the changes, eligible jobholders must be automatically enrolled by you into a pension scheme which meets certain criteria. Once enrolled – and only then – can they then choose to opt out of the pension scheme. Of course, you as the employer will be legally required to make a contribution towards the scheme.
Every employer in the country will be given a date when all changes have to be in place. This is called the staging date. The bigger the company, in terms of the number of employees it has, the sooner it’ll have to make the changes. October 2012 is the deadline for the largest employers. All employers, no matter their size, will have to have completed the changes by 2016. The government will contact companies anything from six to 12 months ahead of their own particular staging date.
If you’ve not already done so, you’ll need to think about the sort of qualifying pension scheme you are going to provide. Then you’ll have to know who and who are not eligible jobholders in your company. When the day arrives, all eligible jobholders will have to be automatically enrolled into the scheme. They must be told they’ve been enrolled into it and that they have the right to opt out of your chosen pension scheme. Companies must then tell the government about the scheme chosen and how many employees are in it.
A word of caution here because there are certain things you must not do, such as encouraging employees to opt out of the pension scheme. You must not dangle incentives or benefits in front of job seekers in return for them opting out of the scheme. And you must not disadvantage an employee in any way because of automatic enrolment.