Since October 2012, a new pension scheme has been gradually phased into workplaces across the UK in an effort to make the application process for pensions easier to digest, Mark Howard has written a guest post for us on the subject.
Currently, it’s been tested in larger companies with the aim to integrate it into smaller businesses across the next few years, with the transition expected to be complete by February 2018. For SMEs, the new pension rules are expected to be applied as soon as an SME is asked to take on the scheme.
The scheme will simply see employees automatically enrolled onto a pension scheme, without any manual application by themselves. Employees will have the chance to opt out of the scheme should they choose to, but companies must employ the scheme once they are asked to.
Here are the rules for employers:
- Before auto-enrolment is established as a pension scheme, employees need to check whether their existing pension scheme already meets the minimum requirements of auto-enrolling.
- Employers need to set a date when they will start auto-enrolment. The dates of when employers are expected to start auto-enrolment depend on the type and size of the business – you can find out more about that here.
- A check will need to be conducted regarding whether the SME is meeting requirements regarding the minimum contribution levels by employees. Auto-enrolment contributions are defined by salary, wages, commission, overtime and bonuses.
- Employees will be given a three month window in which to decide whether they want to opt out of the scheme once it has been implemented.
- Automatic re-enrolment will take place every three years, but the employee can once again choose to opt out of it.
- It is not permitted for businesses to encourage employees to opt out of the scheme – a penalty will be applied.
The move to practice the pension scheme on larger companies has been met with mixed reactions from pension officials. Scott Mullen of auto-enrolment site mypensionexpert.com had this to say regarding the auto-enrolment induction:
“This latest announcement of simplification of Auto Enrolment rules for SME’s will no doubt be welcomed for the UK’s smaller businesses but will obviously come as too little too late for the large employers.
“It is unfortunate that these great policy changes announced by the government punish those most prepared. We have seen many examples in the past where large organisations have efficiently prepared for major changes at great expense in time and resources only to have their best efforts wasted by a whimsical government minister.
“A great example being home information packs in recent years where a whole industry was built up to provide a service only to be scrapped by a later government. That said, any simplification will be very welcomed by all concerned.”
