The effect on pension schemes
Starting from October 2012 any employer must set up and contribute to a pension scheme suitable for automatic enrolment.
An automatic enrolment scheme must meet three sets of criteria. These are explained below.
Employers must register with The Pension Regulator that they have an automatic enrolment scheme in place by at least four months after their staging date then re-register roughly every three years.
Automatic enrolment criteria
To meet the automatic enrolment criteria, a UK scheme must:
- meet the qualifying criteria
- not prevent the employer from automatically enrolling, opting in or re-enrolling a worker, and
- not require a worker to provide information or make a choice in order to remain a member of the scheme.
The scheme must:
- meet the quality requirements
- be an occupational, personal or stakeholder pension scheme, and
- be tax registered.
The quality requirements for personal/stakeholder pension schemes are:
- there must be an agreement between the scheme provider and the employer that the employer must make contributions on behalf of the jobholder of at least 3% of qualifying earnings
- there must be an agreement between the scheme provider and the jobholder where the jobholder can be required to make up any difference to 8% of qualifying earnings all the benefits payable must be 'money purchase' benefits, and
- the employer must be able to deduct any jobholder contributions from pay.
The minimum contribution level required for a qualifying scheme is based on a band of earnings called qualifying earnings. Alternatively, employers can certify that their scheme meets the minimum requirements using a scheme definition of pensionable salary. To find out more about qualifying earnings and certification, read the following sections.
Last update April 2013
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