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Over 1 million employees auto-enrolled

Over 1 million employees auto-enrolled

Category: Pensions

Updated: 16/09/2013
First Published: 16/09/2013

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

The latest figures from the Department for Work & Pensions reveal that more than one million employees have been automatically enrolled into a workplace pension since the initiative was launched in October last year.

The scheme forms part of the Government's drive to address the pensions crisis by encouraging more people to invest in their retirement.

All companies will be legally required to contribute a minimum of 2% of employee earnings, made up from 0.8% from employees, 1% from the employer and 0.2% as a result of tax relief.

However, these amounts will increase to a minimum of a 4% contribution from the employee, 3% from the employer, and 1% in tax relief from October 2018.

This means the equivalent of 8% of an employee's earnings (including overtime, but excluding any earnings over £42,275) will go into their pension pot.

So far, however, it is still early days for the initiative, with only the biggest companies (over 250 employees) being required to implement auto-enrolment.

Medium-sized firms will have to start auto-enrolling employees from April next year, while small businesses with 49 workers or less will be required to implement the changes from May 2017.

Auto-enrolment key facts

  • All eligible employees who are not already in a qualifying pension scheme will be automatically enrolled at the appropriate time.
  • In order to be auto-enrolled, employees must be aged 22 or over, under the State Pension Age and earning more than £9,440 a year.
  • When auto-enrolment begins at their workplace, employees can request an opt-out form that will mean they will not be automatically enrolled.
  • If they fill it in within a month, then their involvement will be cancelled.
  • Those who opt out will also be enrolled again every three years.
  • Employees will not be able to access pension funds until the age of 55.

What Next?

Increase your income in retirement by up to 40% using our online annuity planner

5 reasons why you need a workplace pension

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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