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Pensions Auto Enrolment

Pension auto enrolment has arisen as a consequence of the failure of successive UK governments to encourage employees to save for retirement.

Stakeholder pension schemes

The UK government introduced the requirement for all employers to set up stakeholder pension schemes in 2001. It was expected that the existence of stakeholder pensions and their low administrative costs would lead to a significant increase in the numbers of employees saving for retirement. The number of employees contributing to stakeholder pensions proved to be disappointing.

Pension auto enrolment rules

Pension auto enrolment will apply to the vast majority of employers in the UK.

Under pension auto enrolment, all eligible employees will automatically join their employer’s pension scheme, unless they chose to opt out. Employers are not allowed to encourage or induce their employees to opt out.

For new employers, eligible employees are auto enrolled from their first day of employment.

Rate of contributions under pension auto enrolment

Contributions must be paid into company pension schemes at the rate of at least 8% of relevant earnings. Employers are required to contribute at least 3% and the employee has to contribute the balance.

Action plan

For further assistance in this matter, or any other issues relating to owner managed businesses please phone Shacklefords Chartered Accountants on 0121 448 7466 or e mail