Pension Contributions

[Stevenj214]

"From April 2012, EVERY employee will be auto-enrolled into a company pension with 1% of their salary going to it (rising to 3% by 2017) and employers forced to contribute too. We'll update on what it means and what to do right here."

Does anyone know what the part about employers being forced to contribute consists of?

[Firefoot]

The Pension Act 2008 has slipped under the radar of many employers but is has the potential of adding significantly to costs. It introduces compulsory pension provision which means that from 2012, employers will need to automatically enrol most of their staff in a pension scheme and pay a contribution by 2014 of at least 3%. Unless a company has in place an occupational scheme that meets the Act's requirements (known as a "qualifying Workplace Pension Scheme") it will fall under the umbrella of a national scheme known as ‘Personal Accounts'. The key new responsibilities are:

•Employers must auto-enrol all jobholders in a pension scheme from 2012 if they are aged between 22 and state pension age and earn more than a minimum level of (‘band') earnings

•Band earnings on which contributions are based are those between £5,035 and £33,540 (although these bands will be revised upwards by 2012)

•A contribution of 8% of band earnings must be paid, with the employer paying at least 3% (this can be phased-in over a period of three years from 2012) – it is made up to 8% by adding 4% from the employee and 1% from the government in the form of tax relief

•Employees can opt-out of the scheme and, if they do, no contributions need to be made on their behalf – fines will be in place for those who coerce employees into opting out

•Employers need to re-enrol employees who opt-out, at least once every three years – so the employee will again be presented with the option of joining the scheme or remaining outside of it
Period for contributions

Year Company Employee Tax relief
2012 1% 0.8% 0.2%
2013 2% 2.4% 0.6%
2014 3% 4% 1%


For further details please see Pensions Act 2008 . However, there have been suggestions that if the Conservative Party wins the next year's election compulsory pension provision will not be implemented.

Edited by Firefoot on Thursday 4th March 08:58

[Stevenj214]

Ahh thanks for that. I'll keep my eyes open for any changes if the government changes then.

I was interested because I will probably push pension contributions in lieu of a salary increase this year, so I'll keep in mind to ask for it over and above any mandatory contributions which may be phased in.