Auto-enrolment aligned with tax and NI

| March 27, 2012
Auto-enrolment aligned with tax and NI

The government revealed today that automatic enrolment rates for the tax year to April 2013 will be aligned with tax and National Insurance thresholds to make implementation simple for firms.

Auto-enrolment is being phased in from 1 October, starting with the largest firms, and should be in full effect by the middle of 2017.

It will mean that workers will be automatically enrolled into their employer’s qualifying pension scheme without the worker having to take any action.

Following todaya��s publication of the Governmenta��s response to a consultation on the earnings threshold, Minister for Pensions Steve Webb said:

“The overwhelming response to our consultation was the call to align the automatic enrolment trigger with existing payroll thresholds.

a�?This will help firms make a success of these reforms, as they will be able to better understand who is eligible to be enrolled.

“These changes strike the right balance between getting as many people into workplace pension saving as possible and ensuring that we do not enrol some people who would not financially benefit from saving.a�?

Earlier this week the government announced higher earnings thresholds for automatic enrolment into pension schemes.

Minimum contributions will be payable on earnings between A?5,564 and A?42,475.

When the automatic enrolment policy was first announced in 2008, contributions were expected to apply to earnings between A?5,035 and A?33,500.

The earnings band has now been increased in line with growth in average earnings since that date.

The point at which staff and employers are obliged to make contributions has also been increased, to earnings of A?8,105, compared with A?7,475 previously.

Auto-enrolment is being introduced to increase the number of people saving for their retirement.

It has been estimated that around seven million people are either saving too little for their retirement or are saving nothing at all.

However, the National Association of Pension Funds (NAPF) has warned that auto-enrolment will mean that workers who change jobs several times could accumulate several small pension pots.

The NAPF is calling on the Government to help savers with small pension pots which are can be expensive to administer and may not offer the best value for money for savers.

It wants the Government to establish a framework for a�?Super Trustsa�� which will allow workers to consolidate their pension provision.

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