Government dots the ‘i’s on the new employer obligation to auto-enrol workers into pension schemes | EEF

Government dots the ‘i’s on the new employer obligation to auto-enrol workers into pension schemes

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In October this year, the new duty to auto-enrol all eligible workers into a qualifying pension scheme and to pay minimum contributions will apply to the first employers. All employers, even those who already provide good pension schemes to their workforce, will be affected by this new law on workplace pensions.

The Government has recently published most of the final details on how the new regime will work, and has revised the deadlines for compliance for some companies.

Key announcements

We summarise the key points from the recent announcements:

  • When the duties will apply to you: The timetable (or staging date) for the duty to auto-enrol has been altered for small and some medium sized employers. To find out what your staging date is likely to be, click here. If there has been a change in staging date for your company, don’t be complacent. You need a long lead time in order to get your business ready to comply with the new obligations. In addition, the Government has begun a large publicity campaign. No doubt your workers will soon be asking you about their new rights.
  • Employer contributions: When the new regime is up and running, employers will have to pay a minimum contribution of 3% of qualifying earnings, (as part of a total contribution of 8%). Contribution levels are to be phased in. The initial employer contribution will now remain at 1% of qualifying earnings for an additional year, until 1 October 2017, rising to 2% of qualifying earnings and reaching the final 3% level (as part of an 8% total contribution) from 1 October 2018.
  • Certifying employer schemes: Employers who want to continue to use their own money purchase pension scheme will have to self-certify, amongst other things, that the size of contributions made for the benefit of the worker is adequate. The Government intends to amend two of the tests for doing this, to make it easier for employers who cap pensionable pay or pay fixed allowances, such as shift pay, to continue to use these schemes. New government guidance on certifying money purchase schemes is also now available.
  • Information requirements: Employers are obliged to provide specified information to workers about their rights on auto-enrolment within strict timetables. The Government has agreed to simplify some of the content of these notices and to reduce the number of different deadlines for providing this information to workers.
  • Pay reference periods: These are used to calculate when a worker earns above the trigger earnings threshhold for auto-enrolment and the size of employer and employee contributions. The Government has decided that pay reference periods will be calculated on a pay packet by pay packet basis, rather than requiring employers to track earnings over a period of time.
  • Automatic re-enrolment: Where a worker opts out of auto-enrolment, the employer must re-enrol them around every three years. Employers will be given slightly more leeway to choose the date to re-auto-enrol a worker who has previously opted out.
  • Payment dates to schemes: Employers are obliged to pass employer and employee contributions to the relevant pension scheme by a set date. This payment date will be aligned to the HMRC payment deadline of 22nd day of each month.

Still to come

The current earnings trigger of £7,475 and qualifying earnings band of £5,035 and £33,540 are being reviewed and may increase before the first employers begin auto-enrolling their workers. In addition, the Government will be consulting on the knotty issue of when to exclude workers who work in more than one country and we are awaiting final regulations on certifying final salary schemes.

Are you on top of the new law?

To help you get to grips with your new obligations and work out what you need to do to prepare your business, EEF is running a series of national seminars in June in partnership with NEST: Auto-enrolment for beginners: what you need to know and do now to comply with the new employer pension obligations.

These two hour seminars will provide a straightforward, practical introduction to the new law, with a focus on what you need to do now to prepare your business. Click here to find out more and book.


Media Team 020 7654 1576

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