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Home Get ready for Auto-enrolment

Get ready for Auto-enrolment

Auto enrolment

The government’s auto-enrolment pension rules are now being extended to small businesses. If you own a business employing one or more workers you will have to:

  1. Set up a workplace pension scheme that meets the new rules.
  2. Automatically enrol workers who meet the age and earnings criteria.
  3. Make a minimum contribution for all eligible workers.
  4. Enrol other workers if they ask to join the scheme.

Find out the required starting date for your business via The Pensions Regulator’s website

Choose a pension scheme that suits the business’s needs:

Either approach an Independent Financial Adviser for advice, or small businesses can use NEST (National Employment Savings Trust) or NOW (Now Pensions). Both NEST and NOW offer all you need for auto-enrolement, are easy to set up and abide by the minimum requirement rules.

Key action points

Assess each employee: If earning over £10,000 and over age of 22 they must go into auto-enrolement.  Other employees can choose to opt in if they want.

Each employee must be given a letter about why they have or have not been enrolled and how to opt in or out.

If they opt out within the first month, then that month’s contribution will be refunded to them in the next payrun, if opt out after this date the contribution will sit in the fund until retirement age or transfer to another scheme.

The current minimum contribution rate is 1% for employees and employers – though only on ‘qualifying earnings’ which for the 16/17 tax year is any earnings over £485 per month.

From October 2017 the minimum total contribution will be 5% – where the employer must pay at least 2% (so employee would have to pay 3%).

From October 2018 the minimum total contribution will be 8% – where the employer must pay at least 3% (so employee would have to pay 5%).

Employee contributions are eligible for tax relief, this means they don’t pay tax on the contributions they make to the pensions, making this a tax efficient form of savings.

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