In October 2012 the new workplace pension was introduced. All employers will have to provide workers with a workplace pension scheme by law over the next few years. Employers will automatically have to enrol their workers into a workplace pension if they meet certain criteria.
If you don’t already offer workers a workplace pension scheme, you must set one up before your business’s staging date. A staging date is the date you must start enrolment in a pension, and depends on how many people are on your payroll. Even if you already offer pension arrangements for your workers, you will still have some new obligations to meet.
ELIGIBLE JOBHOLDERS
Workers known as ‘eligible jobholders’ will need to be automatically enrolled into a pension scheme that meets a number of conditions based on the level of contributions paid or the benefits that they receive. Eligible jobholders may choose to ‘opt out’ of the scheme, but only after they have been automatically enrolled by the employer.
Eligible jobholders are workers who:
- earn more than the minimum earnings threshold.
- are aged between 22 and state pension age; and
- work in the UK.
Earnings Thresholds
Current New
Valid to 5 April 2013 Effective 6 April 2013
Lower level of qualifying earnings £5,564 £5,668
Earning trigger for auto enrolment £8,105 £9,440
Upper level of qualifying earnings £42,475 £41,450
Employers also have a requirement to tell any other workers they have that they can opt in to the pension scheme.
Q: Why are the changes being introduced?
People are living longer and are likely to enjoy a longer retirement. But many people are not saving for their retirement at all, and many who are saving aren’t saving enough. These changes will give many more people the chance to save for when they retire. The main benefits for your workers are that you pay a contribution and that it is an easy way for them to save.
Q: When will this affect my nursery?
All employers will be given a date when the changes will have to be in place. This is called your staging date.
- the first staging dates were in October 2012 and applied to larger employers
- the staging date is mainly based on the number of people you have in your PAYE scheme.
You will be contacted by The Pensions Regulator approximately six to 12 months before your staging date.
Q: What will I need to do?
- provide a qualifying scheme for your workers
- set up a process to ensure all staff are enrolled once they are eligible
- automatically enrol all eligible jobholders into the scheme
- pay employer contributions for eligible jobholders to the scheme
- tell all eligible jobholders that they have been automatically enrolled and they have the right to opt out if they want to do so.
You must not:
- encourage your workers to opt out of the qualifying pension scheme
- have recruitment practices that will benefit job applicants who indicate they are prepared to opt out or
- treat a worker unfairly or put them at a disadvantage because of automatic enrolment.
Q: How much will I have to contribute?
The minimum contribution rates that an employer must pay into their worker's pension scheme are being introduced gradually. This is known as 'phasing'. Phasing applies to most, though not all, types of pension scheme (your scheme provider will be able to tell you if phasing applies to you).
The minimum contributions are currently a total contribution of 2 per cent with at least 1 per cent employer contribution.
From 1 October 2018 employers will need to contribute at least 3 per cent of your worker’s earnings, you can choose to pay more. The worker will contribute the rest. They will get tax relief on their contribution and the total combined contribution will be a minimum of 8 per cent.
Q: What if I have an existing pension scheme?
Even if you already provide a pension scheme for your workers, you will need to check if it is a qualifying scheme. The requirements a qualifying scheme needs to meet depend on the type of scheme you have. You should review your existing scheme and discuss the rules and any possible changes with your trustees or pension provider.
Q: How will I know if my scheme is a qualifying scheme?
Many occupational and group personal pension schemes will qualify. To be a qualifying scheme, minimum contributions must be made, or it must provide a minimum rate at which benefits will build up. Even if it doesn’t qualify at the moment, you may be able to change the scheme rules or amend the terms of the policy so that you will be able to use it by the time your staging date comes around.
Speak to a professional adviser about whether your scheme will qualify.
Jacqui Mann is managing director of HR4nurseries
