Workplace Pension Reform – The Top Ten Terms

Author: Huw Jones
Published: 26th January 2012
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Here are the top ten terms you now need to include in your business vocabulary to ensure you know your way around the impending workplace pension reforms:

Staging Date

Each employer will be given a date from which they will have to comply with the workplace pension reforms. This is known as the staging date. The first staging dates will be in October 2012 and will continue through to 2017. The staging date will be broadly based on the number of people you have in your PAYE scheme.  Find out yours here.

Workers

A ‘worker’ is a wider category than just employees and can include some contractors or agency workers. As a general rule, if you have to pay the national minimum wage to someone, or they are working under an apprenticeship, they are a worker.

From their staging date an employer will have to have catergorised their workers into eligible jobholders, non-eligible jobholders and entitled workers.

Eligible jobholders

Workers that you will need to automatically enrol are known as ‘eligible jobholders’. These are workers who:

  • earn more than the minimum earnings threshold
  • are aged between 22 and state pension age;
  • work in the UK.

Non-eligible jobholders

Workers in this group can elect to opt in to the automatic enrolment scheme.  Employers will be required to contribute to the employees pension as if they were  eligible jobholders if they elect to opt in.  Non-eligible jobholders are categorised as:

  • earn more than the lower earnings level
  • are aged between 16 and 75;
  • work in the UK.

Entitled workers

These workers cannot opt in to the automatic enrolment scheme.  However they can elect to join a scheme. The scheme isn’t required to to be an automatic enrolment scheme, nor is the employer required to make contributions.  Entitled workers are categorised as:

  • earn less than the lower earnings level
  • are aged between 16 and 75;
  • work in the UK.

Automatic Enrolment

Employers will be required to automatically enrol all eligible jobholders into a qualifying pension scheme, and contribute into it. Currently many workers decide not to apply to join their employer’s existing scheme, and auto-enrolment is designed to overcome this.

Opting in

A non-eligible jobholder has the right to ‘opt in’ to an automatic enrolment pension scheme. They must provide their employer with a notice to ‘opt in’ and the employer must then make arrangements for them to become a member of the auto-enrolment scheme.

Joining

An entitled worker has the right to request to join a scheme but this does not have to an auto-enrolment scheme. Having provided a request to join notice, the employer must make appropriate arrangements for the worker to become the active member of a UK tax-registered scheme

Opting Out

Having been auto-enrolled by their employer (or decided to opt in) workers can then chose to opt-out of their employer’s scheme during the formal opt-out period. They will be put back in the position they would have been in if they had not become members in the first place, which may include a refund of any contributions taken following automatic enrolment.

NEST

NEST (National Employment Savings Trust) is a new workplace pension scheme open to employers of all sizes. It is a trust-based defined contribution occupational pension scheme that is targeted at businesses not looking to run their own scheme. It can be used alone or alongside an existing pension scheme, and has been designed to be low cost, flexible and simple to understand and administer.

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