What is Pension Auto-Enrolment?

panic-disorder-971Pension Auto-Enrolment is the buzz! So what’s it all about?

The basic idea behind it is a good one. As a nation we’re not saving enough for our retirement. People generally find pensions too confusing, there’s been too much bad press about them, and anyway its years away so why bother? Well if we don’t, we’ll be relying on the Government and they probably can’t afford to pick up the tab as we’re all living longer.


That’s why they’ve bought in pension auto-enrolment. Every employer with at least one employee will have to enrol them automatically into a qualifying pension scheme. They will then have to make contributions into that scheme, as will the employee. Initially the employer will contribute 1% of the employee’s salary, rising to 3% as a minimum. The employee will eventually have to contribute 4% and the Government through tax relief will throw in 1%. The idea is that it should all be automatic with the need to actively opt out rather than actively opting in.


If you are an employer you need to assess the eligibility of your employees to be enrolled in a scheme, you need to put in place the right ‘qualifying’ pension scheme for your needs and you need to make sure that your payroll systems can provide the right data to the pension provider. Clearly this is an opportunity for a lot of people to get very hot and bothered about it all. But it doesn’t need to be that difficult to achieve. There are solutions for everyone – those with small budgets and little time to those with much bigger budgets. The key thing is to start thinking about it early enough and to allow yourself sufficient time to make the decisions needed and put whatever you need to in place.


The first thing you need to do is to find out your ‘Staging Date’ – when you need to have all your employee’s enrolled. Once you have this date, you can work back from there. Ideally you should allow 12-18 months to prepare. You can find your staging date on the Pensions Regulator Website http://www.thepensionsregulator.gov.uk. You will need your PAYE reference number to hand.


They also have some useful information about what you need to do. It’s becoming a reality for every small business that employs even one person, so it’s worth spending time now to get to know what’s involved.


Sarah Pohlinger