Are you an employer? Get ready now for auto-enrolment
More details have been announced today ahead of the introduction of the National Employment Savings Trust (NEST).
All employees earning more than the personal allowance for income tax, which is currently at £7,475 for the 2010/11 tax year, will be automatically enrolled into a pension scheme from 2012.
This earnings threshold is nearly £2,500 higher than the threshold proposed by the previous government when NEST was originally announced.
There will also now be an optional three month waiting period for new employees before automatic enrolment into the pension scheme is applied. Employees can voluntary opt-in to the scheme during this time, although the waiting period will assist those employees who do not want to be proactive in encouraging membership to brand new staff.
Employers who are already operating a pension scheme will be able to self-certify that their current pension arrangements make them exempt from offering NEST to staff.
Minimum contribution rates to the pension scheme remain the same as those previously proposed. Employers will have to contribute 3%, with 4% from employees and 1% tax relief.
Automatic enrolment for NEST starts to come into force on 1st October 2012. It will only apply to the largest employers to start with, with businesses employing 120,000 or more staff having to comply at outset.
Smaller companies will then be phased-in to the auto-enrolment requirements over a four year period.
All employers should take this announcement as a signal to start planning now. As an employer, of any size, you should meet with your independent financial adviser within the next couple of months to assess the new rules together and agree on a suitable strategy.
Photo courtesy of RLHyde.