The Background

The Government, in response to the general acceptance that people are not saving enough for their retirement, is imposing a duty on all employers to automatically enroll employees into suitable pension arrangements and pay contributions on their behalf.

Employers will have to pay pension contributions of at least 1% rising to 3% by 2019 for all employees who are enrolled.  As a minimum, contributions must be paid on employees' qualifying earnings (currently, earnings over £5,824 and up to £43,000 p.a.). The requirements will apply to all employees between the ages of 22 and the State Pension Age who earn over £10,000 p.a.

The new employer duties are far-reaching and complex and will impose a significant administrative burden as well as additional costs. There are penalties for failure to comply. 

In particular:

  • Information will need to be provided to all employees within strict timescales.
  • Complex processes must be put in place to identify and then automatically enrol employees as they become eligible.
  • Employees can opt-out, but they must then be monitored and periodically re-enrolled.
  • Contribution levels will need to be monitored in order to ensure that the minimum requirements are met.
  • Pension schemes must meet minimum standards, must 'qualify' for auto-enrolment purposes and must be certified and registered with The Pensions Regulator.


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