Auto-Enrolment – part 1

 What is Auto-enrolment…?

By the end of the year 2017 all existing small businesses that employ staff will be required by law to offer – and contribute to – workplace pensions.

The Basics

Businesses must enrol all qualifying UK staff (those aged between 22 and the state pension age AND who earn above the personal allowance) into a pension scheme and make contributions into it.

Workers aged 16-75 who earn above the NIC Lower Earnings Level can opt in to the scheme and the employer will be required to make a contribution.

Individuals earning below the threshold can also opt in but there is no requirement for the employer to contribute for their benefit.

Minimum Contributions

Date

Total Minimum Contributions

Minimum Employer Contributions

Oct2012 – Sept2017

2%

1%

Oct2017 – Sept2018

5%

2%

Oct2018 onwards

8%

3%

Contributions will be based on qualifying earnings; these are currently capped at the personal allowance plus basic rate tax band (£41,865 for the tax year 2014-2015).

Qualifying earnings are defined as salary, wages, overtime, bonuses and commission, and statutory sick, maternity, paternity or adoption pay.

Companies with only one director

Where a company only has one director there is no requirement to auto-enrol.

Companies with more than one director

Where there is more than one director there is no requirement to auto-enrol providing they have service contracts rather than employment contracts.

Other points to note

    • A business does not need to set up a pension scheme if no employees are interested.
    • A business may not influence an employee’s decision as to whether they wish to opt out of any pension scheme.

If you have any questions please do not hesitate to contact us by phone on 0333 577 0135 or at Info@tracynewman.co.uk

The information published in this blog provides an overview of the regulations currently in force and is for client information only. No action should be taken without first seeking professional advice.
No responsibility for loss incurred by anyone acting or refraining from acting as a result of the information in this blog can be accepted by its author or the firm.

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