The Pension Act 2011, entailing the automatic enrolment of eligible employees, constitutes a material change in the U.K. pension arrangement. The annual review, the objective of which is to allow for flexibility within the scheme to take account of economic or social pressures, has recently made a number of proposals.

The Government is required to review the thresholds each year to decide if any changes are required. It had been suggested that a longer period was preferable between reviews in order to maintain stability and future planning, however this was rejected and the annual review maintained.

A key thread running through the entire consultation is the overwhelming desire of all concerned to keep the process as simple as possible. The consensus favours the alignment of the automatic enrolment trigger points, with existing PAYE thresholds. 

The reasoning behind this is the widespread understanding and acceptance of these thresholds amongst employers and employees, thus making the education process easier than the apparent use of an arbitrary threshold and the consequent workload in explaining these thresholds. However, it is recognised that this link is not set in stone and is open for review depending on economic and social conditions.

The new automatic enrolment pension scheme is targeted at low to medium earners, who need to save more for their retirement. Whilst this may appear straightforward, the system has to be designed so that it does not in any way penalise certain groups of people, be that on reasons of income, sex, race, religion etc.

There was discussion around the pay reference period and it was accepted that the enrolment thresholds will be pro rata in line with the pay period, such as weekly, monthly paid. It should be noted that the regulations do not allow for a pay period of shorter than one week, even for irregular earning patterns.

The most favoured option is alignment with PAYE threshold for the automatic enrolment trigger and alignment with N.I. contributions for the qualifying earnings band.

The following is to be laid before parliament, for the 2012/2013 period.

• £8,105 for the automatic enrolment earnings band

• £5,564 for the lower limit of the qualifying earnings band.

• £42,475 for the upper limit of the qualifying earnings band.

More information can be found at: http://www.dwp.gov.uk/consultations/2011/auto-enrolment-revaluation.shtml

Pension’s legislation in the UK is to undergo the biggest change for generations.

Companies will be required to offer employees a pension contribution and each company must have a pension in place into which employees will automatically be enrolled. This could be an existing or new pension scheme, as long as it "qualifies". If a company does not have a qualifying pension scheme, then it must introduce one. There are a number of schemes being made available, which are likely to offer different pros and cons to both the employee and consequently the employer.

The new legislation requires auto-enrolment of eligible employees. This legislation will affect all employers and the phase in was due to be over a four year period from 2012, however this may well change depending on the prevailing economic climate.
Employers will have responsibility for ensuring they have a compliant scheme in place and that the correct employers and employees contributions are paid in to the scheme.
For many companies this may involve an increased cost for each employee enrolled. The proposed contribution phasing period is listed below, but as mentioned above this could well change.

These costs are based on a pensionable pay band, which as has yet to be defined.

It is important to note that there is no obligation to offer the NEST pension scheme to employees, however a suitable scheme must be offered and no barriers should be put in place, which may deter employees from joining, which even covers requiring an employee to sign a form.

Employer Responsibilities

Employers are free to select any appropriate occupational or group personal pension “automatic enrolment scheme” to offer their staff.

The employer must ensure their choice of scheme satisfies the primary requirements, which are:
•    It must allow “auto enrolment”
•    It must not force any member to make a choice or provide any information. For example a scheme must provide a default investment fund suitable for all categories of staff irrespective of age, income or attitude to investment risk.
•    The scheme must be registered with The Pension Regulator.

Companies that do not have a suitable plan will need to seek a provider of a qualifying pension scheme.

Qtac Solutions has been in the Payroll software business since 1994 and we have never really bought into the whole awards bandwagon.

After numerous corridor chats we felt it was perhaps time to stop hiding our light under a bushel and get involved. We have customers large and small whom have been users for longer than I care to remember, a significant number of which have been very generous in their comments.

After encouragement from various people, we decided to take the plunge and enter the Software Satisfaction Awards 2011.  Numerous forms were filled out and signed, Emails sent backwards and forwards and then we were in the fray.

We proceeded to ask our users if they would complete an online questionnaire regarding our performance and then waited with bated breath for the next two months to see what the verdict was.

We eventually received a call to say that we were in the short list for two categories. The staff were duly informed and were all extremely positive.

We now await the final verdict, which will be announced at The Software Satisfaction Awards 2011 on 18/10/2011 at The Grosvenor in London.

I am sure there will be a few nervous twitches and nail biting as the Winners in our categories are announced.

Perhaps we should have entered before!