Automatic enrolment – what about my existing pension scheme?

This is the second in a series of short blogs about automatic enrolment, a new law designed to encourage people to save for their retirement.

1 – When is my staging date?

Auto enrolment will require all employers to enrol their employees into a workplace pension scheme, if they are not already a member of a qualifying scheme.

It is designed to overcome the perennial problem of employees not joining their workplace pension schemes when these are offered, simply because they do not sign up to receive these valuable benefits.

What about my existing pension scheme?

Once you have identified your staging date, the next important task for employers is to review any existing pension provision.

Understanding whether your existing provision meets the automatic enrolment qualifying conditions can save a lot of time and money if it means you are not required to establish a new pension scheme to satisfy auto enrolment laws.

It might also be possible to make an existing scheme compliant with auto enrolment.

This can involve changing the contribution basis of the scheme and the eligibility conditions. Existing members of the pension scheme might require a formal consultation process before any changes are made, so check with your HR consultant to make sure you do not fall foul of any employment law requirements.

Assuming the contribution basis and eligibility conditions meet the new requirements, you will also need to check whether the pension scheme itself can handle auto enrolment.

This will mean checking with the pension provider or scheme trustees and then putting in place a formal agreement.

This formal agreement should provide that the employer must make contributions in respect of the jobholder and that the employer’s contribution must be at least 3% of the jobholder’s qualifying earnings in the relevant pay reference period unless a current certificate is in place.

Employers will need to decide whether all non-members and new employees will receive the same terms as existing pension scheme members.

Your second automatic enrolment task is to check whether your existing pension scheme is qualifying and check with the pension provider to see if they can support automatic enrolment.