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Pension: Auto Enrolment - Autumn Statement

The increase in auto enrolment contribution rates due to be implemented in October 2017 and 2018 are to be deferred for six months to align them with the tax year. The minimum required levels of contribution can be summarised as follows:

  Minimum contributions
  Employer Total
To April 2018 1% 2%
April 2018 to April 2019 2% 5%
From April 2019 3% 8%

As auto enrolment began over three and a half years ago the expectation is that all relevant parties should now be aware of their obligations. However, this is often not the case. 

All employers, whether they employ a workforce of 1,000 or just 1, have an obligation to automatically enrol their staff into a qualifying workplace pension scheme. Failure to do so will result in the employer receiving penalty notices, fines and possible court action from the Pensions Regulator. Assuming that existing pension arrangements comply with the regulations or that employees do not wish to take part are not justifiable defences.

Penalties are already being issued and are calculated on a daily basis at a rate determined by the total number of employees. For example those with 5-49 employees can expect rate of £500 a day whilst for those with 1-4 the daily rate is £50.

The setting of each employer’s ‘staging date’ (the date by which they have to commence automatically enrolling employees into a qualifying scheme) was originally determined by the number of employees, the largest employers first. We are now entering a period during which smaller employers are reaching their staging dates. Considering the numbers of small employers in the UK, pension providers are bracing themselves for a significant increase in the number of schemes that will need to be established over the coming months. They are therefore warning that coping with late applications will be challenging.   

With this in mind, it is imperative that plans are put in place as early as possible to ensure compliance. In addition, the earlier that plans are put in place the less likely that problems will materialise.

If you would like to discuss your auto enrolment obligations further, please contact Michael Lapham or your usual Mercer & Hole contact.

 

 

Date: 26th November, 2015
Author: Michael Lapham

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