New timetable for workplace pensions

It will now be October 2018 before minimum employer contributions to workplace pensions are fully phased in. Previously, this was supposed to happen by October 2017 – and before that by 2016, and before that by 2015.

The government says it is taking things more slowly because economic conditions have made contributions less affordable, but the Department for Work and Pensions (DWP) insists it will adhere to the latest timetable regardless of whether the economy improves.

Employer obligations

Under the new laws, employees will be automatically enrolled into a pension scheme with employer contributions if they are aged between 22 and the state pension age, earn at least £8,105 a year, and are not already in a scheme that meets minimum standards.

Once enrolled, employees can opt out. But saving in a pension will be the new default setting for anyone who does not express a choice.

Eventually, the automatic level of contributions must be at least 8% (including 3% from the employer) of the individual’s “qualifying earnings”.  This is earnings, above £5,564 and below £39,853, including overtime and commission.  This means that. The 8% required will always be less than7% of total earnings.

These minimum rates are being phased in from initially 2% to the full amount in October 2018.  Employers can set higher contribution rates if they prefer.

Big employers first

The automatic enrolment regime applies to the largest employers from October 2012.

Progressively smaller employers will then be brought on board month by month until February 2014, when all employers with 250 or more staff will be within scope.

Employers with between 50 and 249 staff will have compliance dates ranging from April 2014 to April 2015, and firms with fewer than 50 employees between June 2015 and April 2017.

The full timetable for auto-enrolment is as follows:

Further information is available on the Pensions Regulator website.