Millions of employees are now automatically enrolled in a workplace pension scheme through a government initiative known as automatic enrolment for employees. This initiative was introduced by the government to help people to save for their retirement. Here, your employer also contributes to it. In this blog, you’ll learn what is automatic enrolment for employees, who is eligible, how much to contribute and what if your employer doesn’t follow the rules?
What is Automatic Enrolment for Employees?
We all need money, especially when we reach the retirement age. The government found out that people were not contributing to their pensions and were unable to live happily after retirement. So, the government introduced new laws under Pension Act 2008 asking employers to enrol their employees into a workplace pension scheme. Here, employees don’t need to enrol themselves in the workplace pension scheme rather, employers automatically enrol them.
Automatic enrolment is the enrolment of an employee into a workplace pension by an employer without the consent upon meeting the certain requirements defined by the government. Prior to this, employees were asked whether they want to join or not, but after 2012, employers need to auto-enrol their employees into a workplace pension. This initiative was aimed to help employees to make savings for their retirement age of 55. Employees have the choice to opt-out of the employer’s pension scheme after being enrolled.
Who is Eligible for Auto Enrolment?
No matter a person is a full-time employee or work part-time, an employer need to enrol them into a workplace pension scheme if they meet the following criteria:
- They are is working in the UK
- They are not already in another workplace pension scheme
- They are over 22 and are under state pension age (65)
- Their earning is over £10,000 a year (for 2021/22)
When you meet all of the above-mentioned conditions, you will be covered even if:
- you work on a short term contract
- you are on leave (maternity, adaptation, carer’s etc)
- you are paid wages by an agency
If you earn less than £10,000, but over £6,240 (2021/22), your employer is not liable to automatically enroll you. However, you can ask to join. Upon request, your employer needs to start contributing.
How Much to Contribute?
For automatic enrolment, the total contribution to be made is up to 8%. You (as an employee) need to contribute 5% and your employer needs to contribute at least 3% of the qualifying earnings (as per the government standard). If you have not been enrolled automatically, in such case there is no minimum threshold you need to contribute. Here, your employer doesn’t need to make payments but can facilitate you to other pension schemes.
The minimum contribution applies to the earnings above £6,240 up to £50,270 (2021/22). This earning is called your qualifying earnings. There are some employers who apply pension contribution to your whole earnings (not just qualifying earnings) depending on the scheme they set up. You can talk to your employers to know how much to contribute.
What if an Employer Doesn’t Follow the Rules?
Employers may face serious actions and penalties if they do not comply with the auto-enrolment rules:
- Upon missing automatic enrolment duties, the Pension Regulator will expect them to pay missed contributions. This would include previous contributions from the day after being eligible to enter a scheme.
- The employers need to pay their previous contributions along with employees’ contributions. If you (employee) are eligible for it.
Pension Regulator is responsible for managing and investigating the concerns related to the workplace pension scheme. So first you need to discuss the concern with your employer. If not resolved, you may contact the Pension Regulator for quick assistance.
Quick Sum Up
That was all about automatic enrolment for employees where all the eligible employees are automatically put into a workplace pension scheme by employers to save for retirement. The total contribution made is 8% where the employee contributes 5% from the qualifying income and the employer contributes 3%. To be eligible for it, your earning need to be over £6,240 to £50,270 (2021/22). Employees can contact the Pension Regulator if their employers are not contributing to the workplace pension scheme.
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Disclaimer: This blog contains general information on auto-enrolment pension scheme.