One of the biggest changes in pension funding was introduced by the Government last year.
Auto enrolment, from October 2012, affects every employer who will have to offer access to a pension arrangement to every employee aged between 22 and State Pension Age and earning over the ‘earnings trigger’.
As an employer, you will ultimately be required to contribute a minimum of 3% of qualifying earnings and your employee will have to contribute 4%, which together with tax relief of 1%, will make a total of 8%. These amounts are being phased in over a five year period.
It is important to understand your obligations and duties as an employer to avoid being fined or charged penalties.
If you have an existing pension scheme it may be that this can be used to meet your obligations. If it doesn’t or you do not have a scheme, then you will need to decide how best to meet the auto-enrolment requirements.
Opting out
The employer must enrol any employee who is eligible and not a member of a Qualifying Scheme. A fundamental principle is that the jobholder must be enrolled and will then be able to opt out. The success of the proposals will be largely attributable to inertia: jobholders not getting around to opting out. Employers will be banned from incentivising opt outs.
Is it safe for employers to give advice?
• The employer may invite an adviser to present to staff;
• There is no problem with giving the staff information;
• No recommendation or advice can be given;
• There is no problem with the employer recommending that employees join a scheme to which the employer contributes;
• The employer must inform the employee that advice is available from a financial adviser;
• The employer should take no financial reward for establishing a scheme.
Start making those enquiries now and seek assistance from a trusted financial adviser, if needed, to help you through the Auto Enrolment journey.
Darrin Woodfield DipFA MIFS
www.darrinwoodfield.co.uk
