The law now obliges every workplace to offer a workplace pension scheme and to make contributions to the pension plans of employees who are paying into the scheme. This is called Auto Enrolment, and it will apply to all employers by 2018.
Pension Auto Enrolment
The law on workplace pensions has changed. Under the Pensions Act 2008, workplace pensions have become ‘opt-out’ rather than ‘opt-in’, which means most employees are automatically enrolled into a pension provided by their employer. The law also requires employers to pay into their employees’ pension schemes.
The law has been brought into force gradually, beginning with big employers before rolling out to smaller workplaces. By 2018, Auto Enrolment will apply to all employers.
Who does the workplace pension law apply to?
Generally, if you’re a UK-based employee aged between 22 and State Pension age and you earn at least £10,000 per year, you will be automatically enrolled into your workplace pension scheme.
How much do employers and employees need to contribute?
Currently, the minimum employee contribution into an Auto Enrolment pension scheme is 3% of your annual ‘qualifying earnings’, which includes tax relief of 0.6%. The law also requires your employer to pay at least 2%. The plan is for these minimum contribution levels to increase, so that by April 2019 you and your employer will be making combined pension contributions worth at least 8% of your annual salary. That’s 5% employee contributions and 3% employer contributions.
Last edited: 30-04-2018