Pensions in the workplace – All UK employers are subject to pension reforms that came into force on 30 June 2012. The new duties will eventually require employers to automatically enrol all eligible jobholders into a qualifying workplace pension scheme and make mandatory minimum contributions.
Employers will be able to use their existing pension arrangements (or put in place new arrangements), provided those schemes meet the qualifying criteria. Alternatively, employers have the option to offer the National Employment Savings Trust (NEST) pension scheme to eligible jobholders in order to meet their new pension obligations. NEST is a Government pension scheme designed specifically for low earners and others who are new to pension saving.
An eligible jobholder will be free to opt out of either type of scheme once they have been automatically enrolled. However, employers will be required to automatically re-enrol jobholders every three years after they first become subject to the statutory employer duties. Whilst the jobholder remains an active member, the employer will be required to pay a minimum level of pension contributions.
There will be a phased introduction of the auto-enrolment regime. All UK employers have been separated into a large number of bands according to their size, with each band being assigned a particular monthly staging date from which they will be obliged to start the enrolment processes. Large employers will become subject to the enrolment duties before small employers. Which band an employer falls within will depend on the employer’s PAYE data broadly:
If an employer does not comply with the auto-enrolment regime the Pensions Regulator may intervene and require certain steps to be taken or levy financial penalties. For employers with 500 or more workers this could be up to £10,000 a day.