What does pensions auto-enrolment mean for the charity sector?

12 September 2010
What does pensions auto-enrolment mean for the charity sector?

We know something big happens in 2012. But what is pensions auto-enrolment and what does the charity sector need to do about it? Here, we look at the key changes coming up for pensions and their implications for voluntary sector employers.

What is auto-enrolment?

Auto-enrolment is where employers are required to automatically enroll eligible job holders onto a qualifying pension scheme and make a minimum contribution to their employees’ pension. 

When is auto-enrolment being introduced?

Auto-enrolment will be phased in between October 2012 and October 2016 in the UK. 

Why is the pensions system changing?

It’s well documented that people are living longer in the UK and on the whole, not putting aside enough money for when they retire. As a result, provisions were put in place in the Pensions Act 2008 to ensure that low to moderate income households have sufficient savings for retirement. 

So what will charities need to do for when auto-enrolment starts?

You’ll need to:

  • have a qualifying pension. This may be a scheme you have already which qualifies - or set yourself up with one that is suitable such as NEST, the new low-cost pensions scheme being introduced.
  • register your scheme with the Pensions Regulator.
  • automatically enroll all qualifying employees onto your pension scheme.
  • make a minimum 3% contribution to your employees’ pensions (though contribution levels are being gradually phased in between October 2012 and October 2017). How are these being phased in?


When auto-enrolment comes into force, who will it affect?
Auto-enrolment will apply to all organisations employing someone. Workers will have to be enrolled onto a suitable pension scheme if they:

  • are 22 or over but below the state pension age
  • work in the UK
  • earn more than a minimum threshold(in 2006/7, this was £5,035).


When will auto-enrolment apply to charities?
It depends on how many people your organisation employs. Larger organisations (ie those employing more than 120,000 people) will be phased in first. After this, each organisation will be given a date on which they should enroll and start contributing to people’s pensions. This is known as your ‘staging date’. Currently those employing between 50 and 500 employees are expected to be phased in during 2014. Those with less than 50 employees will be phased in between 2014 and 2016.


What should I do in the meantime?

  • If you employ more than five people, you should ensure that you have an occupational pension scheme you offer to staff.
  • You may want to find out if your current pension scheme would be suitable for the purposes of auto-enrolment. You can check this through the Pensions Advisory Service website: http://www.pensionsadvisoryservice.org.uk/future-pension-reforms/auto-enrolment
  • Budget for the additional costs.
  • Check the date that you are due to be included in pensions auto-enrolment. (The table here helps - opens as PDF).

 
For further information, see: 

The pensions section of HRBird

Auto-enrolment planner for employers
 from the Pensions Advisory Service 
http://www.pensionsadvisoryservice.org.uk/future-pension-reforms/auto-enrolment


Contact the Pensions Advisory Service helpline 
http://www.pensionsadvisoryservice.org.uk/contact-us.aspx

Please note that HRBird by its very nature offers general information. If you're looking for advice specific to your situation, speak to an HR professional or solicitor. 
Got a question on staff or volunteers? To submit an anonymous query for the HRBird blog, contact us.

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To update this post, following the government's 'Making automatic enrolment work' review - announced 27 October 2010:

- the threshold for auto-enrolment will be increased: individuals who earn over the personal income tax threshold will be automatically enrolled (£7,475 in 2011-12) instead of the lower threshold previously stated.

- very small employers will not be excluded from the requirements for auto-enrolment (as hoped by some).

- a proposed three-month window is to be introduced for organisations to enrol new staff onto their qualifying pension scheme. It's hoped this will cut down on unnecessary administration. Staff will still have the option to opt in.

- The age thresholds for auto-enrolment to be kept the same.

For full details, see the Department for Work and Pensions website: 

http://www.dwp.gov.uk/policy/pensions-reform/workplace-pension-reforms/automatic-enrolment/
HRBird
08/11/2010 0.32.08
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