How Will Pension Schemes Affect The Workforce?
Home How Will Pension Schemes Affect The Workforce?
First you must complete a declaration of compliance to show that you have an auto enrolment scheme in place by at least five months after your staging date.
You'll also have to re-declare compliance around every three years. The good news is, if you have an existing pension scheme, you can use this to meet your employer duties as long as it meets certain criteria.
Auto enrolment schemes must meet these three sets of criteria:
Auto enrolment criteria.
Qualifying criteria.
Quality requirements.
Thee minimum contribution level required for an auto enrolment scheme is based on qualifying earnings. Qualifying earnings are a band of earnings of more than £5,772 and £41,865 or less. These figures are for the 2014/15 tax year and are expected to change each year.
Qualifying earnings include salary, wages, overtime, bonuses, commissions, statutory sick pay, statutory maternity pay, ordinary or additional statutory paternity pay and statutory adoption pay.
To allow you to spread the cost of your employer duties, you can phase in the minimum contributions, as shown in the table below.
Contribution levels required to meet the contribution quality requirement as a percentage of qualifying earnings
October 2012 to September 2017
October 2018 onwards
Total must be at least
Employer must contribute
Agreement must be in place for employee to make up at least
any difference between the
total and the employer amount.
As an alternative to using the qualifying earnings definition, you can choose to use certification. A certificate can cover all workers or groups of workers. For example, you can use one certification basis for one group of workers and a different certification basis for other workers. Thee contribution levels for certification can be phased in over six years from October 2012 and there are three certification options available, as shown in the table below.
Certifying in Advance
You can certify for up to 18 months in advance. You must re-certify at least every 18 months or sooner if there is a 'significant change' such as:
Changes to the scheme contribution level
A company takeover/merger
The certification options and what level they can be phased in are shown in the table below.
* Basic pay must include earnings before deductions such as tax and National Insurance, holiday pay and some statutory benefits but doesn't have to include variable pay such as bonuses, overtime and commission.
** Earnings must include everything that's included in the definition of qualifying earnings.
9% of pensionable salary
You can use a scheme definition of pensionable salary.
Contributions must be calculated from the first pound of pensionable salary.
Pensionable salary must be at least basic pay*.
8% of pensionable salary, provided at least 85%
of total payroll is pensionable
7% of all earnings**
All earnings must be pensionable.
Contributions must be calculated from the first pound of earnings.
The tables below show the three certification options and how they may be phased in.
* Earnings must include everything that's included in the definition of qualifying earnings.
8% of pensionable salary, provided at least 85% of total payroll is pensionable
7% of all earnings*