Adviser > News > January 2010 > Auto-enrolment changes and implementation plans
Auto-enrolment changes and implementation plans
Find out from our Business Development Manager, Jamie Clark, what the latest regulations on auto enrolment from DWP mean for advisers and employers.
Jamie Clark
Latest key changes to auto-enrolment
DWP scraps certification rules
The DWP admitted that their previous proposed set of regulations had been badly received by the industry, and employers were concerned they were too laborious.
As a result, the DWP withdrew the regulation and guidance on certification of Defined Contribution (DC) schemes. This is a welcomed change aimed at reducing the administration burden on employers.
There will still be a need for some sort of monitoring of employers, but these checks and balances are now being created by DWP in partnership with employers, their representatives and the industry, instead of being prescribed in regulations.
Postponement of auto-enrolment
In addition, employers will be allowed to postpone auto-enrolment for temporary employees. They will only be allowed to do this once in any 12 month period. However, there are concerns that temporary contract workers will be left out in the cold by this change.
Reduced administration burden for employers
The DWP has also reduced some of the requirements that employers need to meet.
These changes include
- removing the requirement for the employer to submit how many employees opted out and how many voluntarily joined
- Simplifying the requirement for employers to tell the Pensions Regulator why non-eligible employees have not been automatically enrolled
- reduction in the flat rate penalty for non-compliance from £500 to £400.
Implementation of auto-enrolment from 2012
As outlined in The Employers' Duties (Implementation) Regulations 2010 employer duties will be staged from 2012 to 2016. This will start with larger employers followed by smallest employers with the definition of size based on PAYE scheme size, or other such data. This roughly breaks down to:
Size of employer |
Staging dates |
120,000 - 800 |
Over 12 dates from 1 October 2012 to 1 October 2013 |
799 - 250 |
Over 3 dates from 1 November 2013 to 1 February 2014 |
Less than 50 (sample) |
On 1 March 2014 |
249 - 50 |
Over 4 dates from 1 April 2014 to 1 July 2014 |
Less than 50 |
Over 18 dates from 1 August 2014 to 1 February 2016 |
New businesses that start up |
Over 5 dates from 1 March 2016 to 1 September 2016 |
What's interesting is the way in which the regulations split the employers in the 'less than 50' category into dates. Basically, it all comes down to the last 2 characters of the PAYE reference number.
Those with the last two characters in their PAYE reference number 92, A1-A9, AA-AZ, B1-B9, BA-BY, M1-M9, MA-MZ, Z1-Z9 and ZA-ZZ have been chosen as a sample to make sure the system works for small employers as well as the larger ones. Their staging date will be 1 March 2014, well before the majority of small employers will be staged.
Phasing of contributions
The phasing of contributions for DC schemes up to the eventual 8% looks like this:
Date |
Total minimum contribution percentage of qualifying earnings |
Minimum employer contribution percentage of qualifying earnings |
October 2012 to September 2016 |
2% |
1% |
October 2016 to September 2017 |
5% |
2% |
October 2017 onwards |
8% |
3% |
What next?
The Personal Accounts Delivery Authority has confirmed that "Personal Accounts" is now to be known as the National Employer Savings Trust - NEST. They've also come up with a rather fetching logo - an orange egg. Putting aside the uncertainties on who's going to run the scheme, what the charges might be under the scheme, the default investment fund and the suitability and value of saving in a NEST, you have to hand it to them - the branding is quite good. Expect to hear more on NEST and what the charging and investment structure will be.
As for the small matter of an election in May 2010, smart money says that NEST may change, but auto-enrolment duties won't.
For more information on NEST, visit www.padeliveryauthority.org.uk/nest.asp.
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