Workplace pension law dictates that every employer must now help their employees to save for their retirement. In other words, it is compulsory for employers to enroll their eligible staff into a pension scheme under the Pensions Act; the process of enrolling your employees into a workplace pension scheme is called Auto Enrolment.
Employers will need to look at all workers and decide which individuals meet the criteria for Pensions Auto Enrolment. There are 3 categories of worker:
Employers must assess workers for Auto Enrolment because it is a legal requirement according to the Pensions Act. An employer can however opt to defer Auto Enrolment for new employees for 90 days. After that, employers must enroll Eligible Job Holders into their pension scheme and notify them by letter. Workers can ‘opt out’ of the scheme, however they must do this with the pension scheme provider directly and within 1 month of being enrolled. Employers must also reassess their workforce each pay period. Eligible Job Holders who have ‘opted out’ must be re-enrolled every 3 years.
In accordance with The Department of Work and Pensions guidelines, the employer contribution has increased as of 6th April 2019. The minimum employer contribution was 2% and has now risen to 3%. Staff contributions to their pension scheme have also increased from 3% to 5% of their monthly salary.
Employee Contributions are entitled to tax relief either at source, via salary sacrifice or by the Government depending on the pension scheme rules.