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Auto-Enrolment: What to Expect from your Employer

The new scheme of auto-enrolment in pensions has been devised to benefit both employees and employers even though statistics are showing a surprising 37% wanting out. In what politicians are dubbing ‘the biggest shake-up in UK pensions for over 100 years’, the auto-enrolment scheme will be implemented to automatically put employees into a pension scheme.

Over the next few years, the practice of auto-enrolment is set to be gradually brought into companies across the UK, with larger businesses starting first. Eventually, small businesses will be brought onto the scheme – in fact, they’re already being encouraged to do so.

Why the change?

At present many employees would agree that the terms of a pension can be confusing. This accounts for the fact that many workers do not apply for a pension scheme, and thus do not receive the benefits that a scheme can provide.

In order to counter this, the auto-enrolment scheme will see employees enrolled as a matter of course. Employees can opt out if they wish, but whenever they take a new job, they’re automatically enrolled again. Employees have three months to opt out of the scheme after they have been put onto it, and every three years they will be enrolled once more.

Who does this affect?

To qualify for auto-enrolment, employees must:

• Be over 22 years old
• Not already be in a qualifying work pension scheme
• Be below the work state pension age
• Work in the UK
• Be earning more than £8,105 a year

While employees are able to opt out if they do not wish to put money into a pension, when a company has been asked to take on the scheme, not doing so is punishable by a £10,000-a-day fine until it is implemented.

Testing the water

So far, large companies have been asked to take on the scheme to test out its success, and it is expected to be taken on by SME’s shortly. This move has been met with mixed opinions in the business sector.

Speaking of the scheme, Scott Mullen of auto-enrolment site mypensionexpert.co.uk said: “This latest announcement of simplification of Auto Enrolment rules for SME’s will no doubt be welcomed for the UK’s smaller businesses but will obviously come as too little too late for the large employers.

“It is unfortunate that these great policy changes announced by the government punish those most prepared. We have seen many examples in the past where large organisations have efficiently prepared for major changes at great expense in time and resources only to have their best efforts wasted by a whimsical government minister.”

That aside, a simplification of complex pension rules will see a sigh of relief from many SMEs, as long as they are prepared for the change.

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