Workplace Pensions (Auto Enrolment)
Many companies offer a pension scheme to their employees. There are numerous different types available and usually the company will put some money into your pension if you decide to join.
It is important that you take into account your existing pension provision or that from your previous employer before making any decisions. We will be able to explain the features of your company's arrangements, and may be able to assist you to select the right investment funds for your own needs.
People are living longer lives. This means people can enjoy more time in retirement and need to plan and save for their later years. The Government estimates that around seven million people are not saving enough to meet their retirement aspirations and as such has put changes in place, which commenced from October 2012 which affects both employers and employees.
Auto Enrolment
Since 2012, employers have been required to automatically enrol all 'eligible jobholders' into either the National Employers Savings Trust (NEST) or an alternatively another form of scheme, such as a Group Stakeholder Scheme, Group Personal Pension Scheme or an Occupational Pension Scheme which is deemed as a 'qualifying' or a 'certified' workplace pension. Both Employers and Employees have to make minimum contributions into the scheme. The process is being staged, dependent on Employee head count, from 1st October 2012 to 1st February 2018, with large employers being the first to have to take action.
What Do the Changes Mean for Employers?
All UK employers are legally required to automatically enrol eligible workers into a qualifying workplace pension scheme and make minimum employer contributions. Eligible jobholders are workers aged between 22 and State Pension age who earn above the earnings trigger (currently £10,000 per year) and work or ordinarily work in the UK.
Employers must also re-enrol eligible workers who have previously opted out approximately every three years. Failure to comply with auto enrolment duties can result in significant penalties from The Pensions Regulator.
The minimum total contribution under auto enrolment is currently 8% of qualifying earnings, of which at least 3% must come from the employer. Employers can choose to contribute more than the minimum, and many do so as part of their overall employee benefits package.
Choosing the right qualifying scheme — whether NEST, a Group Personal Pension, a Group Stakeholder Pension, or an Occupational Pension Scheme — is an important decision for any employer. SBC Financial can provide independent guidance to help employers understand their obligations and select an appropriate arrangement for their workforce.
What Do the Changes Mean for Employees?
If you are an eligible jobholder, your employer is required to automatically enrol you into a qualifying workplace pension scheme. You will receive a notice from your employer confirming the scheme you have been enrolled into, the contributions being made, and your right to opt out.
While you have the right to opt out within a one-month window, doing so means you will miss out on your employer's contributions — effectively giving up part of your remuneration. In most cases, remaining enrolled is the right financial decision, particularly given the tax relief available on contributions.
Before making any decision about your workplace pension — including whether to opt out, increase your contributions, or consider additional private pension saving — we strongly recommend seeking independent financial advice tailored to your own circumstances.
Important: The value of pensions can go down as well as up and you may get back less than you invest. Tax treatment depends on individual circumstances and may be subject to change. The figures and thresholds quoted reflect rules in force at the time of writing and may have since changed.