The Press and Journal (Inverness, Highlands, and Islands)
Fresh duties placed on employers as new scheme launched
A landmark scheme to automatically place millions of people into workp l a c e pensions was launched at the beginning of this month.
Up to 10million staff are expected to be involved eventually, but what part do employers play in the process?
Judith McDonald, 32, managing director of Contempo Lettings and Property Management in Aberdeen, said she was keen to learn about the recent changes. She said: “I employ two people and I would like toknowhowthe legislation differs now and howit will affectmyself, my business and my staff?”
Mike Carter, a director of Johnston Carmichael Financial Services at Elgin, said: “In amove to encouragemore people to save for their retirement, the UK Government rolled out measures on October 1 that place new duties on employers to automatically enrol employees into a work- based pension
“Qualifying earnings are all gross earnings”
scheme. The staging date timetable for employers to comply with this new legislation runs from October 1, 2012, to April, 2017, and is determined by the number of employees in the employer’s largest PAYE (pay as you earn) scheme on April 1, 2012.
“It is only the large employers with 120,000 or more employees who had their staging date on October 1. For a company the size of Contempo, with just three staff in total, the staging date is between January, 2016, and April, 2017.
“To enable employers to complywith the legislation, the National Employment Savings Trust (Nest) has been introduced. Nest is a low-cost pension scheme that employers who don’t run a qualifying pension scheme or no scheme at all can use to auto-enrol their employees. Nest is not the only low- cost pension scheme option available to employers – there are other similar competitively priced plans.
“Employees eligible for automatic enrolment are those who aren’t already members of a qualifying scheme; are aged between 22 and the state pension age, and have earnings above the current income tax personal allowance of £8,105 for 2012-13.
“This means increased costs for employers currently not paying any pension contributions on behalf of their employees. In recognition of this, both employers and employees only have to contribute 1% of qualifying earnings each initially. Qualifying earnings are all gross earnings, including overtime and bonuses, between £5,564 and £42,475. Employers will have to auto-enrol eligible employees into a pension scheme and make employer contributions for them, alongwithdeducting employee contributions from their pay.
“Employees aged between 16 and 21, or over statepension agebutunder 75, can ask to be enrolled and the same minimum contributions apply.
“Employees without qualifying earnings can also ask the employer to arrange a pension for them, but in that case employers won’t have to pay in. Employer administration duties under this legislation are especially important in relation to timing, payroll information and employee communications.”