Since October 2012, all British workplaces have been required to offer a ‘workplace pension’ to all their permanent employees. The rule was first applied to large companies, but now all employers, even those run by one person with one staff member, must have pension provisions in place by law. Until then, employers varied wildly in their pensions packages or whether they even offered them.
The UK’s Department for Work and Pensions, in collaboration with the Pensions Regulator have a useful website which aims to demystify the regulations surrounding compulsory pension schemes, a scheme known officially as ‘Automatic Enrollment’. As millions of people now have workplace pensions that both they and their employer pay into, the website explains to businesses how this will affect them, their businesses and their clients’ businesses.
Even if a company has only a single employee, that employee still needs to have a pension to help secure their staff’s income post-retirement. This includes cleaners, nannies, PAs and other personal care assistants. Employers are defined by the DWP as those who pay wages and deduct tax and National Insurance contributions from their salaries. If a company employs agency staff however, then responsibility for automatic enrolment lies with the agency, not the company using the workers. So far, around 79,000 employers have already signed up.
So far, 5.4 million employees have already been automatically enrolled, where they will see their pensions topped up by the employer and get these contributions paid into their pension pot tax free. The employee also benefits as this means they can start saving for retirement early. The earlier someone starts putting money aside for their later years, the better financial circumstances they will have when that time comes. Until AE was phased in, many employees had no pension plan put in place, which would have meant them relying on the basic State Pension. Many companies simply did not offer pensions, and many workers had not given any thought to what would happen once they no longer need to work. Employees who have retirement plans already in place or who do not plan to retire in the UK, for example, can opt out of the pension scheme if they wish. Under the scheme, employees can only be enrolled if they are not now with a pension, are aged between 22 and the ‘state pension age’ (65 for men and women currently) and work in Britain on a salary of £10,000 or more a year.
Using the catchy hashtag #DontIgnoreIt, the DWP and the Pensions Regulator are promoting the site with the help of a brightly coloured and furry mascot named Workie, a ‘larger-than-life’ character created to help remind employers of their pension responsibilities. The site also features a video starring millionaire businessman and panel member of the Dragon’s Den show Theo Paphitis, explaining the benefits of workplace pensions for employees.
The website is available at: www.workplacepensions.gov.uk