What Is Auto Enrolment?

In October 2010, the Pensions Minister substantiated that the government would go ahead with executing the modifications planned in the Pensions Act 2008, along with supplementary policies. The modifications commenced additional employer responsibilities to auto-enrol employees and make donations to a pension plan on their employee’s behalf.

The new amendments will apply to all employers regardless of the company size. In order to assist the demands for those employers who have no pension scheme, a refreshed national pension scheme, the National Employment Savings Trust known as NEST, has been incorporated.

Auto-enrolment means that workers will be automatically enrolled into their employer’s eligible pension plan whether they sign up for it or not. Currently, most workers fall short of accepting or applying for important pension benefits because they don’t volunteer to participate into their employer’s scheme. Auto-enrolment will eliminate this inconsistency.

Beginning October 2012, any qualifying workers will have to be auto-enrolled into a designated pension scheme. Employers will be able to select the particular scheme they prefer which may take into account the National Employment Saving Trust. All qualifying schemes must have minimum provisions in reverence of the benefits it supplies or the sum of contributions paid into it. In addition, the scheme must supply auto-enrolment for all qualifying workers and for any new employees when they become eligible.

Under these responsibilities, employers must: . enrol qualifying employees into an eligible workplace pension plan . select the eligible plan and either: contribute a minimum 3% towards a definite contribution plan or NEST; or . propose membership of a detailed benefit plan or particular complementary scheme that will have a contracting out assertion or upholds the test scheme standard

A qualifying employee is a worker within the age range of 22 and the state pension age. They must earn above the income taxed personal allowance which comes to over [£7,000.00] in 2011 and 2012. Contributions will be allocated to earnings between approximately [£5,000.00 and £33,500.00].

Additionally, employers will have a consistent responsibility to sustain eligible pension requirements for employees who:

• are presently members of eligible plans; 
• or those who become members of any plans

There will be a three month waiting period established for business owners to enrol employees into their particular plan. Within this time, workers can select to jump in and begin saving immediately. Employees will also be able to opt-out of their employer’s scheme if they choose not to join.

Larger employers who are expected to auto-enrol between October and November 2012 will be permitted to being auto-enrolment from as soon as July 2012 to evade the Christmas season. Employers will be allotted the option to re-instate employees three months either side of their involuntary re-enrolment time.