In the not too distant past, if you offered a contributory pension scheme to your staff then it really was a ‘perk’, and something which identified you as a generous employer.
However, all that has changed, as for most companies it is now a legal requirement to operate a workplace pension scheme, to automatically enrol staff into the scheme whether they ask to join or not, and to make contributions into the scheme.
As mentioned above, most companies in the UK are already legally required to operate a workplace pension scheme. By February 1 2018 all UK employers will need to provide such a scheme – check here for details of your ‘staging date’ – the date by which your scheme must be operational.
The only circumstances in which you may not have to operate a workplace pension are if none of your staff meet the eligibility criteria. However, anyone who meets all of the following criteria must be enrolled:
- Aged between 22 and state retirement age
- Earns more than £10,000 per year
- Works in the UK
- Has not made a personal decision to opt out of the scheme
Of course, almost all companies in the UK will have at least one employee who satisfies these criteria.
Any householder who employs a nanny, carer or other home help is also covered by the workplace pension obligations, even though they might not think of themselves as an employer.
Currently, you must pay at least 1% of an employee’s qualifying earnings into their workplace pension. From April 6 2018 this will increase to 2%, and from April 6 2019 it will be 3%. Qualifying earnings are annual earnings between the lower and upper National Insurance thresholds, which are at present £5,824 and £43,000 respectively, and which will rise to £5,876 and £45,000 from April 6 2017. Bonuses and commission are included in the definition of qualifying earnings.
The minimum contribution to be made by each employee enrolled into your scheme is 0.8% of their qualifying earnings. This will rise to 2.4% on April 6 2018 and 4% on April 6 2019. The Government will then top-up the employee’s contribution via tax relief, where it will add 25% of whatever the employee pays.
So, the mere fact that you offer a contributory workplace pension and automatically enrol your staff into this scheme is nothing special. If you want to demonstrate to current staff and applicants for new roles that you are a generous employer, then you may need to set up a pension scheme where you offer to pay in more than the legal minimum, or you may need to launch your pension scheme earlier than you need to. That really might be something to shout about!