Since its introduction in 2012, auto-enrolment has redefined the pensions saving landscape.
According to data from the Pensions Regulator, it’s brought a total of 9,937,000 people into auto-enrolment schemes to date, and involved 1,400,918 employers.
By making workplace pension saving the default option, it’s helped more employees save towards retirement where previously they might not have had access to a workplace scheme.
It’s likely this is something you’re already well aware of as an employer, but with minimum contribution rates rising again in April 2019, you’ll need to make sure you’re prepared for the change.
Here’s a reminder of how auto-enrolment works, and what your responsibilities are.
One of your duties is to check which of your staff are eligible for auto-enrolment.
Employees who work in the UK, earn more than £10,000 a year, and are aged between 22 and state pension age, must be auto-enrolled into a pension scheme.
What do employers need to do?
Aside from setting up the scheme and making sure all eligible employees are included, you have some additional responsibilities as an employer.
Employers and employees are both required to make a minimum contribution to auto-enrolment pension schemes.
In most schemes, this contribution is only made on the employee’s qualifying earnings.
The lower limit for qualifying earnings in 2018/19 is £6,032, while the upper limit is £46,350, so the percentage is taken from the pay that falls between these two limits.
In 2018/19, your minimum contribution to employees’ pensions is 2% of their qualifying earnings, but this will rise to 3% in 2019/20.
Meanwhile, employees must put in 3%, which will rise to 5% from April 2019.
After an employee has joined a pension scheme through auto-enrolment, you’ll need to provide them with certain information.
This includes letting them know they have been automatically enrolled, what this means, and informing them of their right to opt out or back in to the scheme.
Any employees who have opted out of an auto-enrolment scheme must be automatically re-enrolled on a regular basis, usually every three years.
You’ll also need to re-declare your compliance with auto-enrolment.
To show you’ve complied with your auto-enrolment duties, you need to keep records. These include:
Employee information, such as their personal details, national insurance number, gross qualifying earnings, auto-enrolment date and opt-in or opt-out notices.
Pension scheme information, including your employer pension scheme reference, scheme name and address.
How could auto-enrolment change in the future?
A report published by the Department for Work and Pensions (DWP) in 2017 suggested lowering the minimum age from 22 to 18, which would bring an additional 900,000 young people into auto-enrolment.
The same report recognised the need to find a pension saving solution for the 4.8 million self-employed people in the UK who are not included under auto-enrolment. The DWP plans to look at different options to solve this before implementing any changes.
It’s also possible that minimum contributions could be further increased after 2019, to encourage savers to contribute more than 8%, but the Government has said it will assess the impact of the contribution increases first.