What is auto-enrolment?
Auto-enrolment is a new obligation imposed on employers by the Goverment to help employees save for their retirement.
Which employees qualify for auto-enrolment?
Employees must:
- Earn above the earnings threshold £9,440 (2013-14 personal allowance);
- Be aged between 22 and the state pension age;
- Be working in the UK;
- Not already contributing to a qualifying scheme.
Staging date
Most single person limited companies have a staging date in 2017.
Using NEST as your pension provider
The government have set up a low cost pension fund, the National Employment Savings Trust (“NEST”) as an easy to open, easy to operate scheme for employers to use.
Pension contributions
Under the scheme the minimum contributions required are:
- 1st October 2012 to 30 September 2017: 2% in total of which the employer must pay at least 1%.
- 1st October 2017 to 30 September 2018: 5% in total of which the employer must pay at least 1%; and
- 1st October 2018 onwards: 8% of which the employer must pay at least 3%.
Do I have to comply?
If you are a director of your company and there are no other employees and you have not issued an employment contract to yourself then the new rules will not apply.
If your spouse is not a director but is on the payroll then you may have an obligation. However, clients of Clearways Accountants have been advised to set a salary at a level for maximum tax and administrative efficiency; this is less than the earnings threshold, currently £7,692 (2013-14) and therefore contractor companies would not have to set up an auto-enrolment pension for their employees.
If you want help in understanding your obligations under auto-enrolment then contact Clearways Accountants on 01737 244298.