Auto-enrolment, the government initiative that requires businesses to offer pensions to their employees is here, and without knowing the basics, your organisation could incur penalties that could have been easily avoided.
We’ve teamed up with the Money Advice Service, the independent organisation who help companies and individuals better manage their money, who have given their suggestions on the best ways small businesses can tackle Auto-enrolment.
Automatic enrolment in four questions
More and more workers are being automatically enrolled into workplace pension schemes by their employers. Here are four questions that will help you understand how it works.
Who gets auto-enrolled?
Your employer is legally required to enrol you if you:
- Work in the UK
- Are aged between 22 and State Pension age
- Earn more than £10,000 each year
- Are not already in a qualifying pension scheme
Even if you’re not eligible for automatic enrolment, you still have the right to join a workplace pension scheme. And depending on your earnings levels, your employer may still be required to contribute to your pension if you join.
If you’re already in a workplace pension scheme, automatic enrolment doesn’t affect you.
How will you know what’s happening?
Your employer will explain in writing exactly how automatic enrolment will affect you. In many cases this will be done by letter, but some employers may use other methods, such as email.
The precise timing of your workplace starting Auto-enrolment depends on the size of the business you work in, but all businesses will have started by 2017.
Your employer must tell you:
- When you’re being enrolled
- Who operates the pension you’re being enrolled into
- What type of pension it is
- The level of contributions you and your employer will pay into the pension
- How to opt out if you don’t want to join the scheme
- How does it work?
Unless you want to opt out you don’t need to do anything. Your employer will have to make at least the minimum required contributions into your pension. You will usually have to pay in too ñ your contributions will be automatically taken from your pay packet.
If you aren’t eligible for automatic enrolment, then it’s up to you to decide on the next steps. If you want to join a workplace pension scheme, you’ll have to tell your employer. They can’t refuse your request.
What if you want to opt out?
In general you’ll need to submit a form, but some pension schemes will allow for opting out online or by phone. Your employer will tell you who you need to contact.
If you opt out within one month of joining, your employer will refund any money you’ve paid into the pension scheme. If you opt out later, the money will usually stay in the pension scheme until you retire.
If you opt out, your employer is required to automatically enrol you into their pension scheme again every three years, assuming you remain eligible for automatic enrolment at that time.
Can your employer force you to opt out?
No, while you have the right to opt out of your workplace pension, your employer can’t force or encourage you to opt out, treat you unfavourably for not opting out, or take the decision not to enrol you.
If you think your employer might not be implementing automatic enrolment correctly, contact The Pensions Regulator via email firstname.lastname@example.org or call on 0845 600 7060. You can do this anonymously.
All information accurate at time of publication.
This article has been provided by the Money Advice Service.