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Automatic Enrolment – What You Need To Know

What is it?

In 2012, the government introduced a policy that will help countless people save for their retirement – it is known as the workplace pension scheme. Through this scheme, all employers will be required to provide a pension into which employees are automatically enrolled. As I write this, many staging dates have already passed, with many in dentistry set to occur in the coming weeks and months.

So who qualifies for automatic enrolment? The criteria states that the individual must:

  • Be aged between 22 and state pension age
  • Earn more than £10,000 a year
  • Work either part or full-time in the UK

In some circumstances, self-employed team members such as associates, hygienists and therapists may need to be enrolled, as the pension rules do not follow HMRC tax rules.

Who pays what?

There are three parties that are required to pay a minimum percentage into the workplace pension scheme – the employer, the employee and the government.

Currently that number stands at 1 per cent for an employer and 0.8 per cent for an employee. By 2018, however, which is when all schemes must legally be in place, this will rise to 3 per cent and 4 per cent respectively. The government are also obliged to add an additional 0.2 per cent in the form of tax relief, which has a planned increase of another 0.8 per cent by 2018.

The Employee

From an employee’s perspective, the automatic enrolment pension scheme is an extremely viable way of securing monetary funds for the future. What’s more, each individual has the option of nominating a dependant that will continue to receive the pension after they die, so there can be no doubt of the benefits that this new system will provide.

Of course, there is the option to opt out of the pension – one may be close to retirement or have other financial priorities perhaps. If that is the case, the employee simply needs to contact the pension provider and request an opt out form. Once completed, the form needs to be handed to the employer, who will then terminate the payments.

The Employer

The employer’s role in the pension scheme is one of legal requirement. As such, there are a number of tasks that must be carried out in accordance with the guidelines and timeframes, including finding out the staging date, understanding and managing the costs and completing the declaration of compliance – an online form that has to be submitted to the Pensions Regulator. Failure to meet these requirements can lead to enforcement action followed by penalty notices of up to £50,000 or even court action in serious cases.

Get Help

Automatic enrolment, for the most part, is relatively straightforward. But if you have any questions or require assistance during the process if you are an employer, then it is always wise to utilise the services of an Independent Financial Adviser (IFA), such as those at money4dentists.

Automatic enrolment is imminent, so make sure you are prepared for when it happens.

Author Richard T Lishman, Managing Director at money4dentists

For more information please email info@money4dentists.com or visit www.money4dentists.com

Posted by Gemma

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