Pension Reforms 2012

Big pension reforms are coming in from October 2012, which will mean that employers must automatically enrol eligible staff into a pension scheme.

Under the reforms, employers must also:

• Make contributions on their workers behalf
• Register with the Pensions Regulator
• Provide workers with certain information about the changes and how they will affect them

Employers will have a choice of providing a pension scheme of their choice, or enrolling qualifying staff into a National Employment Savings Trust (NEST), which has been specifically set up to help employers to meet their duties under the reforms.

What classifies a worker as eligible?
A worker classes as anybody you pay the national minimum wage or more to, or anybody working under an apprenticeship.

They are eligible for auto-enrolment if they:

• Earn more than the minimum earnings threshold;
• Are aged between 22 and state pension age; and 
• Work in the UK.

When will the changes come into effect?
The reforms are being phased in over a four year period starting in October 2012.

When it will affect you will depend on how many people you have in your PAYE scheme, the Pensions Regulator has said that employers with the largest number of workers will have the earliest staging dates. Those with fewer staff will have later staging dates, from 2014, and the Pensions Regulator will contact you 6 to 12 months before your date.

What contributions will you need to make?
You must contribute at least three per cent of your worker's earnings, but you can pay more if you wish.
The worker will be responsible for paying the rest, and they will get tax relief on it, but the total combined contribution will be a minimum of 8 per cent.

What if I already have a pension scheme in place?
You will need to check that it is a qualifying scheme. To qualify, minimum contributions need to be made, or it must provide a minimum rate at which benefits will build up.

Find out more about qualifying schemes