Auto Enrolment is a scheme set up by the Government, which requires all UK employers to put their qualifying workers in a pension scheme. This has to be done by a certain date, which is called a staging date. Auto enrolment means a small percentage of your wage is put into a pension pot, but it isn’t just you adding to this, your employer will add an amount, and there is also tax relief available. This money is used to build up your pension, so when you retire, you’ll have the money you’ve saved on top of what you receive from State Pension.
There are different types of pension scheme that you can choose. With a private provider you may pay a monthly fee, called a ‘employer pension charge’. This usually covers the cost of running your pension scheme, and also can provide some supporting services.
However, the government offer a scheme called NEST (National Employment Savings Trust) which is free for employers to use. Other schemes, such as the People’s Pension have a one-off set up fee to join.
The Auto Enrolment Scheme is being introduced because the government found that not enough workers were putting money away for a pension, or they weren’t putting enough into a pension to help them in later life. Also, as people are living longer, it is becoming more important to have money put away as it is putting strain onto the State benefit system.
As an employer, your staging date is the date that all staff have to be enrolled. You will need to know your PAYE number to be able to find out your staging date. However, if you don’t know your PAYE number then you can request a reminder email.
The staging date changes for different employers, as it depends on how many staff you have that are eligible to be auto enrolled. To find out you staging date, go to http://www.thepensionsregulator.gov.uk/employers/staging-date.aspx
So, who is eligible to be enrolled? Employees who are over age 22, but who are under the state pension age will be enrolled, providing income is more that £10,000, and you are employed in the UK. If these apply, you will be automatically enrolled into the pension scheme. However, as an employee, you can opt out of the auto enrolment if it doesn’t sound right for you.
If the only employee is a company director, then you are not obliged to auto enrol.
It is important that you understand your options and, if not, obtain advice from an IFA (Independent Financial Advisor). Pensions advice is a regulated activity and therefore your accountant, or bookkeeper, cannot advise you on the type of pension that is best for you although they can give you contact details for NEST if requested.