Changes to the way pensions work are coming in by October.
If you’re not quite prepared yet, here’s a little guide to help you through the changes.
Briefly, what they will mean is that employers will need to automatically enrol certain workers into a pension scheme, make contributions on their workers’ behalf, register with The Pensions Regulator and provide workers with information about the changes.
If you haven’t got the ball rolling yet time is running out as the first of the changes come into place from October.
All employers should be issued with a date from when the duties will first apply to them. This is known as their ‘staging date’ and will be based on the number of people in an employer’s PAYE scheme.
Employers with the largest numbers of workers in their PAYE schemes will have the earliest staging date.
Once you have your staging date, which can be found by visiting www.tpr.gov.uk/staging, employers will need to assess their workforce to see what their duties will be in relation to each of their workers. It is important that companies identify which workers need to be automatically enrolled.
These ‘eligible jobholders’ consist of employees who are aged between 22 and state pension age, are working in the UK and are earning above £7,475.
Employers with an automatic enrolment duty will then need to choose a pension scheme.
They might want to use an existing scheme or set up a new one with a pension provider.
In addition, they my want to consider the National Employment Savings Trust (NEST), a Government backed pension scheme with a public service obligation, meaning it must accept all employers who apply.
Under the rules, employers which offer a defined contribution scheme to staff must make sure they are paying an overall minimum contribution of at least eight per cent of the worker’s qualifying earnings, of which at least three per cent must be from the employer.
Employers who already have a pension scheme can confirm that it is suitable for automatic enrolment by a process called ‘certification.’
Workers who have been automatically enrolled have the right to opt out of the employer’s pension scheme. There is an opt-out period of one month, where any deductions made from their salary will be refunded.
As well as automatically-enrolling eligible jobholders, employers must also put certain other workers into a pension scheme, if these individuals ask. What the employer will need to do depends on the type of worker.
Certain workers have a right to ‘opt in’ to an automatic enrolment scheme and the employer is required to arrange this and make employer contributions.
The new rules will also require employers to keep detailed and accurate records about their workers and their pension schemes.
These must be maintained for a minimum of six years, and will be subject to checks from the regulator.
They will need to include details of the ages and earnings of everyone who works for them at all times.
Much more information on the process can be found on the pensions regulator website at www.thepensionsregulator.gov.uk