“I’m in” apparently – What auto-enrolment pensions really mean.
You have probably seen the information. It seems everywhere you look there is a high profile business person telling you that they are in. This is all very nice and you may well be ‘in’ but what does that mean? I am told that ‘I’m in’ but what am I actually in?
For employees: in simple terms the government have introduced a series of changes which they believe will lead to a more secure financial future for the workers of the UK on retirement. This means that employees who meet the criteria will be automatically enrolled in an appropriate pension scheme unless you choose to opt out. The criteria are basically;
- You are not already in a qualifying pension scheme
- You are aged 22 or over
- You are under State Pension age
- You earn more than £9,440 a year (this figure is reviewed every year), and work or usually work in the UK
You, I and the majority of workers in the UK probably fall into this category. So this is definitely something we need to be aware of.
Your employer will have something called a staging date. Staging date, despite sounding like one of those complex buzz words people throw around, is really a very simple thing. It is the date where your employer should be getting on with it and it is based on the number of employees in the company. You should get formal notice when it is due to happen.
As the staging happens you will be automatically enrolled into a suitable pension scheme, unless your current scheme fits the bill in which case there could be some changes. The exception to this is if you want to opt-out of the scheme. This is a personal decision and you would be well advised to take advice on this before you make that choice. It will be up to you to opt out though or you will be enrolled automatically. If all this hasn’t already happened it will probably start for most companies at some point over the next 2 years.
Will it cost you more to be in the pension scheme? Well if you are not currently in a scheme or on a lower cost option then, yes. The cost of the pension will be taken from your wage at source. Again here the amount and frequency will be given to you by your employer.
For employers: it is your responsibility to make sure this process happens for your staff. The long and short of this is that you should have probably done (or will need to do) all or some of the following based on your staging date;
- Set up a pension scheme that meets the criteria
- Check with your provider that your current scheme is up to scratch
- Auto enrol your employees or update as needed
- Monitor payment, contributions and information as needed
- Look after opt-outs and variables and even make refunds.
As with all these kinds of changes there are exemptions and different regulations to be considered. I am not going to go into them here because it really does require extended study. The best option is probably to ask someone who is an expert in pensions and get the full picture based on your individual circumstances.
So as to the original question “What am I in” the answer is either ‘a pension’ or ‘the process of auto-enrolment and maintenance of a pension scheme’
In either case you need to make sure you find out what and when is going to happen for you personally. We cannot cover everything involved in this one small article so if you have any doubts talk to someone and make sure you are up to speed.
This is coming, it is legislation and one way or another you are going to be in it.
There is a good general advice site and tools from the Department of Works and Pensions here: