Automatic enrolment pensions: what are they?
This year sees the pension laws for the UK workplace undergo major changes as the Government attempts to get more people within the workforce preparing financially for their retirement at an earlier point in their working lives. The principal change involves something called an auto enrolment pension, and some of those who stand to be affected by the introduction of this, whether it is employees or those running a business, may still not be completely clear as to what it is. Given that employers in particular need to be aware of what their responsibilities are when it comes to the auto enrolment pension it is important to know what is and what you need to do.
The major difference between this new form of pension and the existing pension funds that many businesses already operate is that with automatic enrolment, employers are expected to enrol every employee eligible (those between 22 and the present pensionable age) onto the scheme. Employees can then ask to be removed from it within a month of this if they do not want to participate. With previous workplace pension schemes the employee usually chose whether to sign up for them in the first place or not, so this scheme reverses the previous standard way of doing things. Inevitably this increases the level of work that employers will have to undertake, which has led to some unhappiness amongst business owners, but the advantages in terms of the greater numbers likely to be committed to a pension scheme are also clear.
The automatic enrolment scheme also requires a financial contribution from employers which distinguishes it from previous workplace pension legislation, as employers are expected to top up the pension funds of each employee participating in the scheme by contributing at least three percent of the eight percent qualifying earnings minimum that has to be put into the scheme for each worker.