Automatic enrolment pension – what does it mean?

The automatic enrolment pension is on the way

Have you heard about the new automatic enrolment pension? Today’s guest blog explains what it means:

By now some of you may have heard of the automatic enrolment pension scheme – particularly if you are an employer needing to make provisions for the new legislation.  In essence, the pension auto enrolment legislation has been designed to instil an opt-out rather than an opt-in ethos in the world of pension provision. 

Currently many people choose to avoid the decision of whether to join a pension scheme. Others simply can’t afford it with every penny of their wage being precious to their monthly costs.  With automatic enrolment up to 10million people will have been automatically enrolled in a pension scheme by 2017.

The over 60’s are set to grow by 40% in the next 30 years – a huge demand on an already overburdened state.  With people guessing that state provision is now heading towards its final curtain call, the importance of making private plans is increasingly important. 

Whatever the government’s motives are for the latest move, automatic enrolment could be ultimately beneficial to both employer and employee with the right planning and the incorporation of decent employer contributions.

The important question with regards automatic enrolment pension is who is eligible?  The answer emphasises the sheer scale and importance of the scheme.  If you fall into any of the following categories you’ll be earmarked for the automatic enrolment pension plan:
if you’re at least 22 years old and below pension age,
if you earn more than £8,105 P.A,
and if you ordinarily work in the UK.

This will inevitably incorporate a vast chunk of UK citizens into either a private scheme on offer from the employer, or a government approved NEST scheme.  Private advice is abundant on the net and organisations like NOW:pensions will be one of the companies leading the way when it comes to private provisions.

The scheme will culminate in 2018 when even a single employer – those who pay nannies, solitary shop assistants etc. – will need to be part of a functioning scheme.  If you are already part of a scheme that meets the minimum criteria nothing will change.  For the rest of us, even if you opt-out of an automatic enrolment pension you’ll be re-enrolled every 3 years.