Essentially it is a system in which employers must automatically enrol their employees onto a pension scheme if they are eligible. In the past, many workers have missed out on the potential benefits of having a company pension.

Auto-enrolment was introduced to nullify this issue. The 2008 Pensions Act has made it compulsory for businesses to provide a pension scheme and those who refuse to follow run the risk of being penalised severely.

You may also ask ‘why now?’ well the underlying reason is that for many years it has become clearly noticeable that people have not been saving enough for their retirement years. In conjunction, life expectancy is on the rise meaning that the state can no longer cope with the ever-increasing pressure. Therefore, the necessity for private pension planning has reached an all-time high and needed legislation such as auto-enrolment to reinforce it.  

This legislation greatly benefits the majority as it places the responsibility in the employer’s hands rather than the employee thus relieving unwanted stress. You are eligible for auto-enrolment if you register with any of the following:

• Work in the UK
• Aged between 22 and State Pension age
• Earn more than £10,000 a year.

How does it work?

At the end of each month (or whenever their payday is), a percentage of the employee’s wage is deducted and placed into a pension as well as an employer contribution. The amount placed into the pension each month is also dependant on additional pre-requisites. For example, some people pay in a fixed amount whereas others pay in a certain percentage if they have a fluctuating monthly income.

The government will also make a contribution to the pension if they pay income tax, which is known as tax relief. This works by making their private pension contributions tax-free up to certain limits. The limits are as follows: If their pension pot exceeds the ‘annual allowance’ of £40,000, surpasses the ‘lifetime allowance’ of £1 million, or is more than 100% of their earnings in a year. Tax may also be payable if their pension provider does not abide by HMRC rules or is not registered with them. As of now the minimum contribution to be made by the employer is 1% but is set to increase to 3% as of 06/04/19 onwards.

Find out when your staging date is?

As an employer, you will have to put systems in place to ensure that all eligible employees have the opportunity to decide if they want a worked based pension scheme.  You should have received your staging date; this is the date by which you should have auto enrolment set up within your company.  

Alternatively, get in touch with us and we will advise on the next steps. 

You can call 01623 490 120 or email This email address is being protected from spambots. You need JavaScript enabled to view it..