23rd August 2013 at 12:36pm
There was a time when people started work and joined the company pension scheme. Routinely. That time is coming around again; you may have heard of a thing called automatic enrolment.
Automatic enrolment is a government backed policy that requires employers to set up a suitable pension scheme and automatically join their eligible employees. It will affect all employers, from the very largest ones with tens of thousands of employees, to those with just one or two. It’s happening in stages, with the biggest employers having already started putting people in from the end of 2012, to the smallest, who will have to set up a scheme some time between now and 2017.
The Pensions Regulator (the official regulator of pensions in the UK) sets out a timescale as to when each employer has to take action, and has already started communicating this to the people running companies. If you’re an eligible employee – that is, between age 22 and state pension age earning at least £787 per month – then your employer will at some point need to enrol you in the pension scheme. In doing so, they will need to pay a minimum of 3% of your ‘qualifying earnings’ (this includes salary, wages, commission, bonuses, overtime, statutory sick pay, statutory maternity, paternity and adoption pay) and you will also need to contribute 5%. A total of 8%.
That might seem like a lot, but the amounts will start lower and only build up to this full 8% by 2017. And many millions of people aren’t saving anything at all towards retirement, so it’s crucial that we kick start the savings habit.
Even just a few months in to the five year roll-out, the Department for Work and Pensions (DWP) estimate that over one million people have been joined to pension schemes as a result of this initiative.
Despite some early predictions of many people simply opting out, over 90% have stayed in so far.
Despite some early predictions of many people simply opting out, over 90% have stayed in so far. Maybe we are on track after all to return to the days where people routinely save through their workplace.
Of course, if you’re an employer yourself, you may well already know all this and have plans in place to meet your duties when they arise…