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Pensions may not be the most exciting subject, but they are important, sufficiently important for public sector workers to be pursuing a national campaign of industrial action. But that is not what this blog is about.

Starting 1 October 2012 changes to the law enacted in the Pensions Act 2008 and the Pensions Act 2011 will come into force requiring all employers in Great Britain to enrol employees automatically into a pension scheme (in fact the legislative scheme uses the word “jobholder” rather than employee).

Implementation will be phased over a four year period, commencing with the larger employers (see the timeline on the Pension Regulator’s website: www.tpr.gov.uk/staging ). The Pensions Regulator states that for businesses with fewer than 50 employees auto-enrolment will not apply until after the end of the current Parliament, which presumably means after May 2015.

What is auto-enrolment?
Under auto-enrolment, employers will be obliged to enrol eligible jobholders in a pension scheme, into which the employer must contribute at least 3% of the jobholder’s earnings. Employers must either use their own qualifying pension scheme or the National Employment Savings Trust (NEST). Jobholders will have to contribute 5% of earnings, but this is to be phased in over 5 years.

Which employees are eligible?
Auto-enrolment will apply to all jobholders between the ages of 22 and state pension age. Jobholders include permanent and temporary employees as well as agency workers. They must earn at least £8,105 a year (this is the same amount as the personal allowance for Income Tax).

When will this apply to my company?
Please look at the timeline linked to above. In addition, we understand that the Pensions Regulator will be contacting companies six months before the “staging date” on which they must implement auto-enrolment. Nevertheless it may be sensible to begin planning now, and in particular to begin thinking about whether to set up your own qualifying pension scheme or to use NEST. We can recommend specialist pension advisers.

There is of course a lot of detail. Jobholders may opt out, but employers should take care as they may not induce jobholders to opt out of scheme membership and they may not make offers of employment conditional on opting out.

The Pensions Regulator will be responsible for ensuring compliance with the auto-enrolment scheme. Defaulting employers will face regulatory sanctions including compliance notices and penalties that will be determined on a sliding scale according to the size of the employer. The largest defaulting employers may face penalties of £10,000 per day! If it is considered that there has been a “wilful” failure to comply, then the individuals responsible may face criminal charges.