News

Pensions Act 2008: Auto enrolment and employer obligations

  • September 07, 2012
  • By Hunters Law

Provisions of the Pensions Act 2008 recently came into force which will have a significant impact on the obligations on employers and the rights of employees.

Over the course of a five and a half year staging process, the Act requires all employers to automatically enrol eligible jobholders into a qualifying pension scheme.  “Jobholders” includes permanent and temporary employees and agency workers, whose eligibility will be determined by their age and earnings.

An employer will have to make contributions into a pension scheme of 3% of an eligible jobholder’s qualifying earnings per year, while each eligible jobholder will be required to contribute 5%.  An eligible jobholder can, however, elect to opt out of the pension scheme.

The change from an opt-in to an opt-out pension system means the provision of information to all workers is fundamental.  Jobholders must be clearly informed of their obligations to contribute to a pension scheme, if they are eligible, and of their right to opt out.  Ineligible jobholders must also be fully appraised of their right to opt in to a qualifying pension scheme, depending on their age and earnings.

The staging process, during which employers will be required to enrol their employees in a registered pension scheme and begin making contributions, begins on 1st October 2012 with larger employers being affected first.  Small employers with fewer than 50 workers have been given commencement dates between June 2015 and April 2017.  However, smaller employers should start considering their obligations under the Pensions Act 2008 now and begin assessing their work force to establish which members will be eligible jobholders and subject to automatic enrolment.

If you would like any further information in connection with the obligations imposed on both employers and employees under the Pensions Act 2008, or you would like an assessment undertaken of your workforce to determine which of your workers will be eligible jobholders under the Act, please contact Chloe Vernon.

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