The biggest change in corporate pensions for years is edging closer with the requirement of compulsory employer contributions via auto-enrolment set to start from 1st October 2012.
Driven by the Government the idea is to improve the living standards of the nation when they come to retire and Niche Advice are on hand to help Employers through the minefield of paperwork and implementation so they can make sure they adhere to the new pension legislation without compromising their day-to-day activities.
Basic information on Auto-Enrolment / How much will Auto-Enrolment Cost Me?
The cost of auto-enrolment for employers is detailed below.
Auto-Enrolment start date is staged depending on the number of your employees (details available on request).
The levels of contribution are determined by two qualifying bases:
– Banded earnings basis
– Pensionable earnings
Banded earnings basis
From 1st October, the minimum contribution for auto-enrolment will be 8% of a band of earnings (£5,715 to £38,185, tax year 2011/12), but these lower and upper levels will change from time to time, probably each year with the budget announcements.
The employer will be responsible for at least 3% of the contribution via auto-enrolment, but can contribute more, with the employee making up the difference.
Importantly these percentages apply to the employee’s total earnings within the bands, and therefore they include commission, overtime and bonuses and not just basic salary.
Employers that have existing defined contribution schemes can not choose this basis.
The level of contribution for auto-enrolment will be phased in from 1st October 2012 to 1st October 2018 until it reaches the figures specified to allow for the adjustment.
Pensionable earnings
From 1st October, the minimum contribution for auto-enrolment will be 9% from the first £1 earned.
The employer will be responsible for at least 5% of the contribution via auto-enrolment, but can contribute more, with the employee making up the difference.
The definition of ‘pensionable earnings’ that is used for auto-enrolment is the higher of:
– the employer’s definition of pensionable earnings
– basic pay (excluding any variable additional income such as commission, overtime and bonuses.
The level of contribution for auto-enrolment can be reduced slightly if pensionable earnings are at least 85% of total earnings and further still if 100% of total earnings.
To find out more about auto-enrolment, please complete our Contact Form stating whether you are an employer or employee and ask to be added to our circulation for updates.