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Further to the recent changes to the Pensions Act 2008, the phasing in of the new auto-enrolment into a company pension scheme begins in October 2012,  with the largest employers (those with 120,000 staff or more) being affected first and smaller employers  employing less than 30 staff being required to begin auto-enrolment by 2017.   


Once employers become subject to the new rules they will be required to auto-enrol eligible employees into a pension scheme if they are using PAYE regardless of how many employees they have.   The impact of these new regulations on employers will be massive and it is in the their interests to seek careful advice before embarking on the scheme. 


Responsibilities of the Employer


Ø  Employers must enrol eligible employees into a pension scheme.

Ø  Employers will be required to make contributions to the pension scheme to top up those made by the employee.

Ø  Employers must keep employees informed when they roll out the pension scheme and  of any changes in the scheme that may affect them.

Ø  Employers must register with The Pensions Regulator – this will be an online process, details of which will be advised later in the year.

Ø  Employers must keep detailed records of their employees (including pension schemes) for a minimum of 6 years.


Employee Eligibility


Ø  Employees must be aged between 22 years and state retirement age

Ø  Employees must be working in the UK

Ø  Employees must be earning a specific amount (at present the figure proposed is £7,475 pa)

Ø  Employees not already in a pension scheme that meets qualifying requirements


Nationality, length of stay in the UK or residency is not relevant in determining eligibility, only that employees are ordinarily working in the UK.  Casual workers, contractors and freelancers, as well as contracted employees will need to be auto-enrolled if they meet the required criteria.


Qualifying earnings must also include overtime, commission, bonuses, sick pay, maternity/paternity/adoption pay in deciding the eligibility of the employee.


What this means for Employers


The total contributions must be 8% of the employee’s gross earnings between £5,035 and £33,540 per annum.  (Anything earned over that is not taken into account when calculating how much to pay).   The employer must pay 3%, and the employee 5% on which they can obtain tax relief.  Both employer and employee can opt to pay more if they wish.


Choosing a pension provider


Employers will need to decide what pension provider they use for auto-enrolment.  They may have an existing scheme in place or access to one, but it must comply with legislation criteria.


Also available is the National Employment Savings Trust (NEST).  This has been established by the Government to ensure that employers can access pension savings and comply with the rules.  The advantage of using this scheme is that if employees change firms they can still keep the pension scheme with NEST.  Those who have pension schemes with private pension providers will have their schemes frozen if they change jobs, and they could end up with many frozen pension pots if they change regularly.  They would not be allowed to transfer from one private pension plan to another.


To conclude


This new law will eventually affect all employers who employ even just 1 employee eligible for the scheme.  It will be phased in over the next 5 years.


Employers with trust based schemes may find them becoming more expensive with a surge in membership, so it may be more cost effective to switch to a contract-based plan. 


Employers can utilise a ‘waiting period’ of three months following an employee commencing employment to assess their eligibility.  In addition, employees may give written notice to opt out of the scheme, (called an ‘opt out notice’) available from the pension provider, within 1 month of being enrolled on the scheme.  Any contributions paid in that time would be refunded.  After that 1 month period it will be more difficult to opt out.


Further information on auto-enrolment can be found at  www.thepensionsregulator.gov.uk and by contacting the Corren Troen employment team.





      LATEST NEWS |  The Olympics – looking after your team



The summer in London is going to be a hectic one.  As well as the Diamond Jubilee celebrations taking place, London will be inundated with thousands of extra visitors during the Olympic month attending the many events at various venues around the city and beyond. 


All London businesses should have received their Transport Pack from Transport for London (TFL) detailing the changes to rail services and road closures during the games.  If you have not received yours you can apply for one at www.tfl.gov.uk   A further leaflet of travel information/road closures is being sent out to local businesses shortly. 


These changes are likely to impact on staff reaching their places of work, not least due to the sheer number of extra people using the transport services and road networks.  


Employers are considering allowing employees to work flexible hours or from home wherever possible. Furthermore, if companies have offices outside London employees could be based there temporarily and this could be a way round commuting difficulties. Working together with employees will help them and the employer to ensure work can continue effectively with minimum disruption. 


It is in all employers’ interests to face these issues head on to avoid a mass exodus of employees wanting to take their annual leave while the Games is on.  Many will want to take time off to watch events or may have volunteered to help. 

Careful planning and flexibility by employers should help keep business on track during this busy period.





Corren Troen
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London SW1E 6DY
United Kingdom
DX 2306 Victoria

T: +44 (0)207 592 8900
F: +44 (0)207 592 8901

Please visit our website at www.correntroen.com

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© Corren Troen 2012 
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