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In an effort to tackle the problem of an estimated 7 million UK workers with no or inadequate, financial provision for their retirement, the Government introduced ‘auto-enrolment’ to pension schemes, the aim being to overcome either fear or lethargy on employees’ parts when they are faced with a long term financial decision.

With effect from 1st October 2012 employers were obliged to automatically enroll eligible employees into a qualifying workplace pension arrangement.

‘Eligible employees’ are:

  • not already in a qualifying workplace pension scheme;
  • at least 22 years old;
  • below state pension age;
  • earning more than £10,000 pa (subject to change each year); and
  • working or ordinarily work in the UK (under their contract.)

Income from the minimum level (£6240*) to £50,270* (*2024/25) [ET1] is in scope for deductions. This includes part –time & fixed term workers and in some cases, those employed on a consultancy basis.

Employers may choose to enrol [ET2] employees into an existing scheme or contribute toward a new scheme such as NEST, NOW! or The Peoples Pension. In either case, minimum contribution levels must be met. Employers can of course contribute more than the minimum levels if they wish. 

Employers must provide information on any workplace scheme and employees are entitled to join within two months of starting employment.

Employees can opt out of the workplace pension scheme, and if they do so they must be re-enrolled every 3 years, and they can again opt out.  Contribution levels are set at:[ET3] 

Employee – 5% of salary

Employers – 3% of salary

State – 1% in the form of tax relief.

See the Auto Enrolment Planner for Employers for more information about auto enrolment.

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