Our Guide To Employer Pension Duties
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What does it mean?
The new pensions obligations require employers to enrol their workers into a qualifying pension scheme if they are not already in one. An employer can use an occupational or personal pension scheme if it meets certain quality requirements or else enrol workers in the National Employment Savings Trust (NEST), the government scheme. To be eligible a worker must be between age 22 and state pension age and must earn at least £8,105 a year (in 2012/13). Workers include permanent and temporary employees and agency workers.
Which employers have to comply?
The new pension obligations apply to all employers in the UK, large and small.
When do I need to have pensions in place?
There will be various staging dates, with larger employers having to comply from 1 October 2012. Employers with 250 or more employees will have staging dates running between 1 October 2012 and 1 February 2014. Employers with fewer than 250 employees will be assigned staging dates running from 1 April 2014 to 1 April 2017.
How much will it cost?
On each worker’s earnings over a minimum of (currently £5,715) up to a maximum limit of (currently £38,185) an employer will have to pay
- From October 2012 to September 2017: 1%
- October 2017 to September 2018: 2%
- October 2018 onwards: 3%
If you are a worker then you will also be required to contribute into the pension scheme for your earnings over a minimum of (currently £5,715) up to a maximum limit of (currently £38,185)
- From October 2012 to September 2017: 2%
- October 2017 to September 2018: 5%
- October 2018 onwards: 8%
What if employees do not want to pay into a pension scheme?
Workers who have been automatically enrolled will have a statutory right to opt out of whichever scheme they have joined, within prescribed time limits. Workers who have opted out will be automatically re-enrolled every three years during a six-month window. Workers who are not automatically enrolled (for example, because they earn less than the earnings trigger or they opted out or are aged under 22) can opt in by giving their employer notice requiring the employer to arrange for them to join an automatic enrolment scheme. But they can only do this once in a 12-month period. Individuals earning less than the lower end of the qualifying earnings band can opt into a pension scheme too, but will not be entitled to receive any employer contributions.
What happens if employers don’t comply?
Employers will not be allowed to induce workers to opt out of scheme membership or make job offers conditional on opting out. The Pensions Regulator will police employer compliance. Employers that breach the new duties will face compliance notices and penalties that vary according to the employer’s size. Large employers that do not comply could be liable for escalating penalties of £10,000 a day. Criminal penalties could apply in the case of “wilful” failure to comply.