Auto-Enrolment and Flex-Benefits
Auto-enrolment is aiming to encourage greater private pension saving, particularly amongst those on low or moderate incomes.
The Pensions Act 2008 introduced a requirement for employers to automatically enrol any eligible jobholder working for them into a workplace pension scheme that meets certain requirements, and provide a minimum employer contribution.
It has been designed to overcome the fact that many workers have been missing out on valuable pension benefits because they didn't apply to join their employer's scheme, or their employer didn't offer them access to a workplace scheme.
How it affects employers and employees
An employer must ensure that they provide a qualifying pension scheme and automatically enrol all their eligible jobholders into that scheme from their staging date. The staging date is the commencement date relevant to the size of the business based on payroll numbers.
Individual workers, if they are eligible jobholders, will be automatically enrolled into the scheme. This means that the employer must make all the arrangements and the individual need do nothing to be put into the scheme. However, the individual may choose to opt out if they wish.
Ultimately, the minimum contribution level is equivalent to 8% of qualifying earnings, of which the employer must pay at least 3%, although they could choose to pay more. The individual must make up the difference, if any, and will receive tax relief on their contributions. So if an employer pays 3%, the individual must pay 4% and will receive 1% tax relief, based on a basic rate of tax of 20%. These contribution levels are being phased-in and are being increased gradually to help people adjust.
Employers also have to maintain accurate records at all times and be ready for inspection by the Regulator.
In today's market, employees are looking for a package that not only rewards them financially, but also complements and enhances their lifestyle both in and out of the workplace. Astute employers also know that keeping employees enthusiastic and engaged is about providing them with a choice of rewards and benefits that make them feel valued and appreciated.
Flexible benefits allow employers to offer their employees a range of benefit options, which they choose to match with their personal circumstances. Examples of options include:
- Childcare Vouchers
- Life assurance
- Buying and selling holiday entitlement
- Cycle to Work schemes
- Shopping, entertainment and other discounts
Information regards taxation levels and basis of reliefs are dependent on current legislation, individual circumstances are not guaranteed and may be subject to change.
The Financial Conduct Authority does not regulate taxation advice.