Workplace Pension Reforms

The provision of pensions in the future is something that is on the mind of many employers.

Small employers need not be overly concerned at this stage.   It is the intention of the Pensions Regulator to write to employers both at 12 months and 3 months before enrolment in the scheme as necessary. 

From 1 October 2012 the largest companies (120,000 in PAYE scheme) will be required to enrol into a pension qualifying scheme being either a private occupational defined benefit or defined contribution pension scheme, group personal or stakeholder pension schemes, group self invested personal pension scheme or a new scheme referred to as NEST (National Employment Savings Trust).

The smallest business (less than 50 employees) will need to join by February 2016.

Employees who will be entered in the scheme are those who earn more than £7475 (subject to statutory increases) and who are 22 or above but under State Pension Age.

Both employer and employee will contribute with a phase in period.

Years  Employer Contribution Employee Contribution
1-4                       1%                                 1%
5                           2%                                 3%
2017                    3%                                  5%
onwards    

As now with Stakeholder Pension Schemes, employees outside the scheme can request to be entered into a scheme but the employer is not obliged to ‘top up’.  Employees can opt out of the scheme if they wish but every three years such employees must be automatically re-entered (whereupon they can opt out again).