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Delayed Automatic Pension Enrolment for Small Firms

8th December, 2011

As you may be aware, the Pensions Act 2008 introduced a number of notable changes to the UK’s pension regime. Undoubtedly, one the most far reaching is the compulsion on employers to automatically enrol their employees into a pension scheme.  This will involve employers using their own qualifying scheme or a government established scheme (NEST) and making minimum pension contributions for auto-enrolled employees.

Ultimately, employers will be obliged to contribute at least 3% of the employee’s earnings.  Total contributions paid by the employee and the employer must be at least 8% of the employee’s earnings.

Mandatory employer contributions will be phased in over six years.  Broadly, employers will be required to pay contributions of 1% of an employee’s earnings in the first four years, rising to 2% in the fifth year and the full 3% from the sixth year onwards.

This week it was announced by Steve Webb, Pensions Minister, that firms with fewer than 50 employees will be given more time before they must start enrolling staff into such pension schemes.

The starting deadline for small firms has moved from April 2014 to May 2015.  The aim is to help the smaller firms save money and to give those employers additional time to impose the compulsory scheme.

Up to 9 million employees will be affected by automatic enrolment and of those, 44% of employees will see their enrolment delayed (Department for Work and Pensions).

If you are considering amending your contracts of employment and/or employee handbook to comply with these changes, please contact Helen Watson in our employment team for further information.

 

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