Pension changes update

February 20, 2012

Pensions have been in the news constantly over the past few years but in the midst of all the negativity surrounding the performance of existing pensions many organisations may have missed the changes which will apply to company pensions in the coming year.

New company pension rules or National Employment Savings Trust (NEST) are being introduced between 2012 and 2016

The government is making it compulsory for ALL firms to offer a work based pension for their staff (within certain limits) from later on this year.  This will initially apply to companies with 50 and above employees.  Companies with 49 and under employees won’t have to offer work based pensions until 2015.

However, there are certain qualifying rules including the fact that staff must earn an amount above the lower earnings limit (£7475) percentage contributions will be based on this amount up to a maximum earnings limit of between £5715-£38,185 per annum.

  • From October 2012 to September 2016 the amount payable will be 2% of earnings between these amounts of which the employer will pay 1% (for companies employing 50 and over member of staff)
  • From October 2016 to September 2017 this will rise to 5% of which the employer will pay 2%
  • From October 2017 onwards the amount will increase to 8% of which the employer will pay 3%.

Every qualifying individual HAS to be automatically enrolled, although they do have the option to “Opt Out” after they have been enrolled. Any individual who does decide to opt out will have to be automatically enrolled again at some date in the future, they can then opt again. Records of all the opt ins and opt outs will have to kept by the employer.

The above is just a brief outline of what all employers will be faced with from next year. As to when you will receive the notification from HMRC to commence your own plan is unknown as they seem to be contacting companies on a post code basis.

This is just a brief overview of what will be required. For many firms the implementation and administration may provide problematic. We will be more than happy to offer you any assistance to make these changes as smooth as possible.

Should you wish to discuss this further please contact info@investaco.co.uk and we will arrange a free initial consultation to go through NEST in greater detail.

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Earning limits are correct at 27 Jan 2012 and maybe subject to change in the future

Implementation dates may be subject to further changes