The 2015 Budget laid out significant changes to UK workplace pensions. The new contributory pension regulations require (over the next few years) employers to provide a workplace pension scheme to all their employees (who meet the criteria). There has also been the introduction of the National Employment Savings Trust (NEST) which is centred upon ‘auto-enrolment’.
What do the new regulations mean for employers?
“All employers will have to provide workers with a workplace pension scheme by law over the next few years.” states the government website – www.gov.uk.
There will be automatic enrolment into a work place pension for employees that:
- Are aged between 22 and the state pension age.
- Earn at least £10,000 a year
- Work in the UK.
This is a mandatory contribution paid by employers. As such, small and medium sized companies are likely to be particularly burdened by this, while larger companies will also be affected.
Employers, if they have not already started, will need to know when to auto enroll their employees into a workplace pension. The pensionregulator.gov.uk website shows when the new regulations kick in for each specific company.
The National Employment Savings Trust or NEST was set up by the government specifically for auto-enrolment. NEST’s website highlights one of its key objectives as to “make sure that every employer has access to a workplace pension scheme that meets the requirements of the new pension rules”. As a result, the service is free for all employers to use.
What do the new regulations mean for employees?
The legislation means that, gradually, every employee (bar rare exceptions) will be enrolled into a workplace pension – a workplace pension is when a percentage of your pay (usually a small amount) is put into a pension scheme automatically every payday.
In the majority of cases, the employer will add money into the pension scheme for the employee at 1% (rising to 3% by 2018) of ‘qualifying earnings’. Qualifying earnings is either the amount you earn before tax between £5,824 and £42,385 or a year or your entire salary before tax.
For the employee, the new pension regulation means a larger pension pot available in retirement and more money from your employer!