Pensions: The Cost of Failing to Comply with Automatic Enrolment

Since 1 October 2012, the UK’s largest employers (by reference to the size of their PAYE schemes) have been automatically enrolling staff (known as ‘eligible jobholders’) into a qualifying workplace pension scheme. Every employer is covered by the new requirements in the Pensions Act 2008, which include mandatory employer contributions. Employers are notified of their ‘staging date’ by the Pensions Regulator and will have to comply from that date or face potential sanctions and financial penalties. Smaller employers (those with 50 or less employees) will be affected from June 2015.

Broadly, the new legislation requires employers to automatically enrol all staff who are:

  • Aged 22 to state pension age;
  • Working in the UK; and
  • Earning over £9,440 a year.

Some staff who do not meet the criteria above will still be able to opt into the pension scheme the employer has set up for automatic enrolment. Employers are compelled to enrol these employees if they ask.

Employers have to pay a minimum contribution for all staff who are automatically enrolled into a qualifying workplace pension scheme (initially 1% but rising over time to 3%).

A full Briefing Note, setting out the penalties for non-compliance with the auto-enrolment requirements can be downloaded here.

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