The recent reforms have implemented a new auto-enrolment scheme where employers are required to enrol eligible employees into a pension scheme automatically. Employers are also required to contribute to their employees’ pension funds.
Auto-enrolment
Employees that are eligible for the auto-enrolment scheme are:
- Employees aged between 22 and the state pension age who are earning above £10,000 per annum.
The following employees are entitled to join a pension scheme to which the employer contributes but will not be automatically enrolled:
- Employees aged between 16 and 21 years
- Employees aged above the state pension age to 74 years
- Employees earning between £5,824 and £10,000
All employees earning under £5,824 per annum will be entitled to join a pension scheme but have no right to employer contributions.
Minimum contributions
There are minimum contribution requirements of both the employer and employee and the government will also contribute to the pension fund by providing the employee with tax relief on their contributions. These minimum requirements are either based on the employee’s qualifying earnings or pensionable pay. The employer must confirm the method/level of contributions payable before the employee is enrolled.
Qualifying earnings