Auto enrolment – the most frequently asked questions, answered.
- What is auto enrolment?
Previously, many workers have missed out on the benefits of a pension because their employer either didn’t offer them a pension, or they didn’t choose to join up with the company’s pension scheme offering. A new law has come in to place that makes it compulsory for employers to automatically enrol eligible workers into a pension scheme.
- Why is auto enrolment happening?
Auto enrolment aims to help more people receive an additional income to a state pension when they reach retirement age. This Government-led campaign will make it easier for people to start saving for their pension.
FOR EMPLOYEES
- Do I have to contribute into my pension?
If you are eligible, you will automatically be enrolled into your employer’s pension scheme. You will then start contributing towards your pension, as will your employer.
If you do not want to contribute, you may choose to opt-out of the pension scheme and either stop contributions completely or opt to set up your own private pension scheme.
If you completely opt out and do not set up a private pension, you will not have a pension fund when you retire.
- Does everyone qualify for auto enrolment?
From October 2012, workers will be automatically enrolled into a workplace pension scheme if you:
- Are not already in your employer’s pension scheme
- Are aged 22 or over
- Are under state pension age
- Are earning more than £9,440 per year and
- Work within, or normally work within the UK
If you are working part-time or are in temporary, casual or are an agency staff member, there is no difference in rights compared to a full-time employee – you will be automatically enrolled and receive employer contribution as long as you meet the eligible criteria.
- How much will I get from my workplace pension when I retire?
You are able to get a pension estimate or pension projection from your workplace pension scheme provider. They often also have an online calculator, which will help you to work out your potential income once you retire.
FOR EMPLOYERS
- Does auto enrolment apply to me if I am self-employed?
By law, if you are self-employed, you do not have to enrol yourself into a workplace pension.
It is, however, essential to think about what you are going to do for income once you reach retrial age. There are many options to consider including, a stakeholder pension or personal pensions. Alternatively, as part of the reforms, self-employed people will be able to become members of NEST (National Employment Savings Trust
- My company already offers a workplace pension. Do I still have to automatically enrol my employees?
You may not have to, but is essential to check.
Even if all your employees, including all temporary staff, are current members under an existing scheme, they have to meet certain qualifying criteria. Therefore, it is necessary to find out if there are further actions to take. Under this new law, there will also be additional payroll and reporting requirements to undertake.
- What scheme providers are there and what should I choose?
There is a government scheme called NEST, or you can choose a pension scheme offered by a private provider. If you would like some guidance for choosing the best private provider for you, contact our team for some help.
- How do auto enrolment opt-outs operate?
When your employee is auto enrolled they will receive a letter that tells them that they have been enrolled. At the same time you must provide them with a written explanation of how to opt-out and how this works.
Your employee will then have a month in which they can opt-out. This means that any contributions that have already been made by the employer or deducted from the employee’s pay will be refunded.
Even if all of your employees choose to opt-out of your pension scheme and set up with a private provider, you must still provide a pension scheme as an option.
The employee can then go on to arrange private contributions to their own scheme. If you would like help with this, contact Acumen for further information.
Employees who opt-out can re-enrol but only once every 12 months.
Three years after employees opt-out an employer must re-enrol them again. Employees then have the option to opt-out again if they wish.
- Should we use an auto enrolment middleware solution?
There are many organisations adopting middleware solutions to manage the process of auto enrolment. This includes administration work, such as issuing letters to employees. This also comes with a significant fee, where firms such as Acumen would do this for you anyway as part of your agreement.
Our advice is that you do not have to use a middleware software solution. If you would like further information on this please do not hesitate to get in touch.