Automatic Enrolment for Workplace Pensions - Dates and Rates.
What's also in Workplace Pensions?
- Auto Enrolment Pension Rules for Single Director Limited Company
- Automatic Enrolment Help Advice Costs
2012 marked the start for employers automatically enrolling and paying into pension schemes for employees.
Auto-Enrolment into the National Employment Savings Trust (NEST) or a qualifying alternative pension is compulsory.
- NEST is a Public Body set up by/supported by Government
- Alternative, qualifying pensions have to comply with certain rules, contact us for 'Whole of Market' pension options.
- Employers must have set up a pension scheme for employees on given dates for both employer and employee pension contributions.
- Compulsory employer minimum rate pension contributions start at 1% of employee band earnings from 1st October 2012 rising to 2% on 6th April 2018 to 5th April 2019, with employer contributions increasing to 3% on 6th April 2019. Employees must also pay in. Rates and dates are detailed below. (these dates were extended in Budget 2015 to soften the blow on both employers and employees)
- An eligible worker is an employee aged between 22 and state pension age.
What are ‘qualifying earnings’?
Qualifying earnings are a section of a worker's pay. For the 2015/16 tax year this is everything over £5,824 pa and up to £42,385 pa.
Eligible Workers: eligible for tax relief if they’re under age 75 and:
- they have UK earnings that are subject to income tax for the tax year
- they’re resident in the UK at some time during the tax year
- they were resident in the UK at some time during the preceding five tax years and when they joined the pension scheme.
Aged 22 to State Pension Age
- All eligible workers earning £10,000 pa must be automatically enrolled (they can then opt out if they wish within 30 days)
- Non eligible worker earning over £5,824 up to £10,000 pa can ask to be enrolled and IS entitled to Employer Contributions
- Non-eligible worker earning below/up to £5824 can ask to be enrolled but NOT entitled to Employer Contributions
Below Age 22 or over State Pension Age
- Non eligible worker earning over £5,824 can ask to be enrolled and IS entitled to Employer Contributions
- Non-eligible worker earning below/up to £5,824 can ask to be enrolled but NOT entitled to Employer Contributions
Compulsory Employee and Employer Pension Payments
Where a worker is automatically enrolled based upon the above trigger point, there will eventually be a minimum contribution of 8% of qualifying earnings, of which the employer must pay a minimum of 3%.
If the employer chooses to pay the minimum 3%, the worker will pay 4%, with a further 1% paid as tax relief by the government. Contributions are payable on qualifying ‘band earnings’ detailed above.
How Much Will Workers and Employers Pay and When?
Minimum contribution levels will be phased in between October 2012 and April 2019.
- October 2012 to 5th April 2018 - total minimum pension contribution of 2% of qualifying earnings with at least 1% from the employer.
- 6th April 2018 to 5th April 2019 - total minimum pension contribution of 5% of qualifying earnings, with at least 2% from the employer.
- 6th April 2019 onwards - total minimum pension contribution of 8% of qualifying earnings, with at least 3% from the employer.
- So from April 2019 workers may be paying 4% of qualifying earnings into a pension if you do not already (plus 1% tax relief), total 5% plus 3% from your employer.
Auto-Enrolment Start Dates - When employers must comply
By Company Size
- 250+ Employees: 01/10/2012 – 01/12/2014
- 50 to 249 Employees: 01/04/2014 – 01/05/2015
- 30 to 49 Employees: 01/08/2015 – 01/10/2015
- Less than 30 Employees: 01/01/2016 – 01/04/2017
- New Employer Start-ups (Between 2012 and 2017): have between April 2017 and February 2018 to set up auto enrolment.
- All Employer Start-ups after Oct 2017 must have auto enrolment pensions in place immediately.
Employer Can Offer An Alternative Pension? Rules for an acceptable alternative pension
- Min 9% of pensionable pay (not band earnings) inclusive of minimum 4% employer contribution or
- Min 8% of pensionable pay inclusive of min 3% employer contribution, where pensionable pay definition is at least 85% of total pay or
- Min 7% of all pay inclusive of min 3% employer contribution, where contribution based upon all pay not a pensionable pay definition.
Get Help To Set Up Pension Scheme
We can discuss your requirements and we will mail our fees to set up a basic, compliant scheme or a more sophisticated pension if you wish to offer employees a little more. Contact us.