Small business given more time for pensions auto-enrolment

Philip Avery on 18/01/2012

The government has acted in response to pressure from the small business sector to defer the timetable for implementation of pension auto-enrolment.

Under the rules private sector employers are required to contribute initially 1% - rising to 3% into a pension scheme for their staff. All those earning more than the income tax personal allowance figure (currently £7475 per annum) aged 22 or over must be automatically enrolled unless they take specific action to opt out within one month of becoming a member of a scheme or receiving the enrolment information.

The pension scheme concerned must be one which qualifies with the government Pensions Regulator. As well as permanent employees, temporary and agency workers are also covered. Those who opt out will be automatically re-enrolled every three years. Even after an opt-out employees will be able to choose to opt in. Those under 22 or earning less than the minimum can opt in when they become 22 or reach the earnings threshold.

It will be an offence for an employer to induce an employee to opt out. Businesses will need to keep appropriate records for minimum 6 years but in practice it will be safer to keep them permanently.

The largest employers are due to start enrolling in October 2012. The Pensions Minister announced that the delay was to provide some breathing space for businesses in the current economic downturn.

Small businesses of less than 50 staff were originally required to start in April 2014 but now will not be required to start enrolling until May 2015. In addition the speed at which employer contributions are lifted will also be delayed.

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