It may be nearly a year away, but if you are an employer, you should be preparing for 1 October 2012.
Most new laws affecting businesses now start to operate from 6 April or 1 October. Thus 1 October 2011 brought a rise in the national minimum wage, the introduction of new rights for agency workers and the final abolition of the default retirement age. 1 October 2012 will see two more significant changes, which have been long in preparation:
- The start of a five-year phasing in of auto-enrolment – largest firms first – into workplace pension schemes for employees and other workers; and
- The official launch of the National Employment Savings Trust (NEST). NEST has been designed as the default pension where no alternative arrangement is offered by the employer.
Unlike the existing stakeholder pension access arrangements, there will be no exemption for employers with fewer than five employees: if you have just one employee, you could need to auto enrol them in a workplace pension. Broadly speaking, only individuals under age 22, over state pension age or earning less than the personal allowance (£7,475 in 2011/12) are not subject to auto enrolment.
Once an employee is auto-enrolled, you have to make pension contributions unless the employee decides to opt out. (Remember that those who opt out must be auto-enrolled every three years.) The minimum employer and total contribution levels are set as a percentage of ‘band earnings’ and are being phased in over five years (see table below). However, the band has not yet been finalised as the Government is awaiting earnings inflation data. In practice the band is likely to be between about £6,000 and £40,000 a year.
The phasing in of auto-enrolment means that most employers with less than 50 workers will not begin to auto enrol until at least March 2015. That may seem comfortably distant, but many employers will prefer to be ready before the legislation forces them to act.
|
Date
|
Minimum employer
contribution*
%
|
Minimum total
contribution*+
%
|
|
October 2012 – September 2016
|
1
|
2
|
|
October 2016 – September 2017
|
2
|
5
|
|
From October 2017
|
3
|
8
|
* Based on band earnings
+ Employer plus employee gross contribution (i.e. including 20% tax relief)