Auto-enrolment & Personal Accounts - are you prepared?
Employee pension auto-enrolment and employer contributions are to be made compulsory as part of the Government’s attempt to tackle the UK’s pension savings crisis.
Personal Accounts, a new type of pension scheme will also be introduced from 2012 to help employers to comply with their new duties where no Qualifying Workplace Pension Scheme (QWPS) is in place.
Penalties will be introduced for non-compliance and therefore preparation is needed now to ensure a smooth implementation of the legislation and that any interim measures taken over the next two years are compatible with the new regime.
Key details
- Automatic enrolment into a QWPS or Personal Account of all eligible jobholders between the age of 22 and state retirement age earning over £5,035 per annum with contributions based on all pay (salary, bonus, overtime, commission).
- Automatically enrolled employees must be given the opportunity to opt-out.
- Where employees have opted out, re-enrolment must take place, as a minimum, every three years
- Pension scheme must be available and communicated to all staff including agency workers although employer contributions only required for eligible jobholders and jobholders electing to join.
- Employers will be penalised for encouraging or inducing employees to opt out with fines up to £50,000 for non-compliance.
- A maximum annual contribution of £3,600 with indexation, with indexation, this looks like £5,000 by 2012.
- Stakeholder pension legislation will be repealed
- Expected contribution levels, increasing over the first five years are shown in the table below along with the start point for different sized organisations
Contribution levels for Personal Accounts
| Employee & tax relief (%) | Employer (%) | Total (%) | Who? | |
|---|---|---|---|---|
| 2012 | 1 | 1 | 2 | Employers with more than 250 employees |
| 2013 | 3 | 2 | 5 | Employers with between 50 and 249 employees |
| 2014 | 5 | 3 | 8 | Employers with less than 50 employees |
| 2015 | 3 | 2 | 5 | All |
| 2016 | 5 | 3 | 8 | All |
For an audit of how Personal Accounts will impact your business and an action plan for launch, contact Ed Smithson on 0845 362 8426, ed.smithson@truestone.co.uk.
