What is auto-enrolment? and your other FAQs answered

Auto-enrolment has “transformed pension saving” and “boosted the retirement prospects of millions of people”, according to Guy Opperman, Minister for Pensions and Financial Inclusion. With auto-enrolment now fully rolled out, Acumen revisits the subject of workplace pensions to provide clarity about what auto-enrolment means for employees and employers in 2020.

What is auto-enrolment?

Before auto-enrolment came into effect, many British workers missed out on valuable pension benefits. This may have been because their employer didn’t offer them a pension or simply because didn’t apply to join the company’s pension scheme.

Auto-enrolment completely changed things for the better, giving employees greater access to a workplace pension by default – on an opt-out rather than an opt-in basis. Now it is compulsory for employers to not only automatically enrol eligible workers into a pension scheme, but also to provide contributions themselves.

The government began phasing in auto-enrolment from 2012, starting with the largest employers. As of 1 February 2018, all employees – regardless of the size of company – should have been enrolled in their employer’s workplace pension scheme.

Guy Opperman, Minister for Pensions and Financial Inclusion, said: “It’s great to see a whole new generation of workers in big and small businesses putting money away and planning for a more secure future. The progress we’ve made towards eliminating the gender gap in pension saving is hugely encouraging.”

What does auto-enrolment mean for employees?

There are minimum total contributions that must be paid under auto-enrolment. As of April 2019, the minimum contributions for workplace pensions increased. Auto-enrolment contributions for employees is now a minimum of five per cent of qualifying earnings before income tax and National Insurance contributions are deducted.

If an employer-provided a workplace scheme prior to auto-enrolment’s arrival, they might base their contributions on pensionable pay instead. For higher-rate taxpayers, tax relief is available on auto-enrolment contributions but needs to be applied for through a Self-Assessment tax return.

What does auto-enrolment mean for employers?

Employers will need to enrol their staff onto a workplace pension scheme if they:

• Are not already in one.
• Are aged between 22 years old and State Pension age.
• Earn more than £10,000 a year.
• Usually work in the UK.

Based on the latest minimum contribution threshold, employers are obliged to pay a minimum three per cent auto-enrolment contribution. This brings the combined total minimum contribution to eight per cent.

Auto-enrolment advice from Acumen

Acumen’s pension advisers can provide expert auto-enrolment advice to employees and employers alike. Our advisers provide plain English advice regarding everything from employer responsibilities to minimum auto-enrolment contributions and tax relief options.

Whatever your auto-enrolment requirements, we can provide clear guidance and actionable solutions to ensure you are fully compliant and making the most of this government-led pension initiative. If you are based in Lancashire or the wider North West, Acumen is a name you can trust for all your auto-enrolment queries.

For the latest auto-enrolment advice and guidance, or to arrange a consultation, please contact Acumen today on 0151 520 4353 or email info@acumenfinancial.co.uk. Our high-calibre team is on standby to assist you in any way we can.