What is auto-enrolment?
Auto-enrolment has been introduced by the Government. It is new legislation that means eligible jobholders will be automatically enrolled into a qualifying workplace pension scheme. These schemes have to be of a minimum standard.
Qualifying pension schemes
Employers can choose the qualifying scheme they use for eligible workers, provided it meets the minimum standards. For example, defined contribution schemes have to meet minimum contribution levels and defined benefit schemes have to meet minimum benefit levels. You can use your existing scheme if it meets/can meet these standards, or you could use a new scheme like those provided by The Pensions Trust.
Although the new duties were introduced from October 2012, the requirement to auto-enrol eligible jobholders will be phased in gradually. This means that not all employers will be obliged to auto-enrol their eligible jobholders at the same time. Employers with the largest number of eligible jobholders on the Pay As You Earn (PAYE) scheme will have the earliest staging dates (the date by which you have to have workers enrolled).
The option to opt out
Eligible jobholders will be able to opt out of the scheme. However, the employer will be required to automatically re-enrol workers who have opted out on the three year anniversary of the staging date. There is an exception to this re-enrolment, whereby an employer does not have to re-enrol an employee who opts out of pension saving in the twelve months prior to the re-enrolment date.
If you are using a pension scheme from The Pensions Trust as your qualifying workplace pension scheme, please also refer to ‘What should I do with contributions deducted during the opt out period?’